Tax Law MCQ

University of Cebu
College of Law
UCLASS Bar Operations
Taxation Law Society
TAX LAW
MULTIPLE CHOICE
QUESTIONS
2012
by:
Jamero, Jacinto
Orofeo, Daisy
Restauro, Ruth
Ruiz, Sharmine
Vallecera, Virgil
Velayo, Lovely
Bar Operations 2012: Ace the Bar, Race the Car!

References: Law Textbooks, Codes, Reviewers, Notes, Compilations, Articles and Internet Sources
For Private and Personal Use Only
Tax Law Multiple Choice Questions

University of Cebu College of Law
UCLASS Bar Operations: Tax Law Society
GENERAL PRINCIPLES OF TAXATION

1.
The following are similarities of the inherent power of

taxation, eminent domain, and police power, EXCEPT
one:
a.
b.
c.
d.
2.
b.
c.
d.
b.
c.
d.
b.
c.
d.
Taxes may be imposed to raise revenues or to

provide disincentives to certain activities within
the state;
The state can have the power of taxation even if
the Constitution does not expressly give it the
power to tax;
For the exercise of the power of taxation, the
state can tax anything at any time;
The provisions of taxation in the Philippine
Constitution are grants of power and not
limitations on taxing powers.
Tax laws, being imposition of burden, shall be strictly

construed against:
a.
b.
c.
d.
6.
The power co-exists with the existence of the

State.
It is absolutely legislative in character.
It is subject to inherent limitations.
It is subject to limitations found in the 1987
Constitution.
Which of the following statements is NOT correct?

a.
5.
Courts cannot issue an injunction to enjoin the

collection of taxes.
There should be no improper delegation of
the power to tax.
Taxes may be imposed even without a
constitutional grant.
The State has the right to select the subjects
and objects of taxation.
Which is NOT a characteristic of the power of

Taxation?
a.
4.
7.
8.
A person who refuses to pay the tax

The taxpayer
The government
Either the taxpayer or the government,
depending on the evidence presented
The defense available to a taxpayer who is required

to pay excessive taxes is:
a.
b.
c.
That the tax is levied for a religious purpose

Due process of law
Equal protection of the law

2
Both tax laws and GAAP shall be enforced;

GAAP shall prevail over tax laws;
Tax laws shall prevail over GAAP;
The issue shall be resolved by the courts.
Double taxation is not unconstitutional but double

taxation exists when:
a.
b.
c.
d.
9.
Non-impairment of obligations of contract
In case of conflict between tax laws and generally

accepted accounting principles (GAAP):
a.
b.
c.
d.
Among the nature of taxation is that it is an inherent

power being an attribute of sovereignty.
Which
among the following is NOT among its manifestation
as such inherent power?
a.
3.
Are necessary attributes of sovereignty;

Interfere with private rights and property;
Affect all persons or the public;
Are legislative in implementation.
d.
Real estate tax and income tax are collected on

the same real property.
VAT is imposed on the gross receipts and income
tax is also imposed on the same gross receipts.
Income tax and capital gains tax are
collected on the gain from the sale of real
property.
Corporate income is taxed and stockholders
dividends are also taxed by the same
corporation.
How is a tax distinguished from a license fee?

a.
b.
c.
d.
Non-payment of tax does not necessarily

render the business illegal.
Tax is a regulatory measure.
Tax is imposed in the exercise of police power.
Tax is limited to cover cost of regulation.
10. Which of the following statements is NOT correct?

a.
b.
c.
d.
Taxes may be imposed to raise revenues or to

deter certain activities within the state.
The state can have the power to tax although
the Constitution does not expressly give it the
power to tax.
In the exercise of the power of taxation, the
state can tax anything at any time.
The
provisions
of
taxation
in
the
Constitution are grants of the power to tax.
11. Which statement refers to

distinguished from taxation?
a.
b.
c.
d.
police
power
as
It can only be imposed on specific property or

properties.
The amount imposed depends on whether
the activity is useful or not.
It involves the taking of property by the
government.
The amount imposed has no limit.
12. One of the characteristics of internal revenue laws is

that they are:
a.
b.
c.
d.
Criminal in nature
Penal in nature
Political in nature
Generally prospective in application

13. Which of the following is NOT an example of an

excise tax?
a.
b.
c.
d.
Transfer tax
Sales tax
Real property tax
Income tax
14. The Municipality of Bogo in the province of Cebu has

an ordinance which requires all stores, restaurants,
and other establishments selling liquor to pay a fixed
annual fee of P20,000. Subsequently, the municipal
council proposed an ordinance imposing a sales tax
equivalent to 5% of the amount paid for the
purchase or consumption of liquor in stores,
restaurants, and other establishments. The
municipal mayor refused to sign the ordinance on
the ground that it would constitute double taxation.
Is the refusal of the mayor justified?
a.
b.
c.
d.
No. The refusal of the mayor is unjustified

because double taxation is allowed in our
jurisdiction.
No. The refusal of the mayor is not
justified because the impositions are of
different nature and character.
No. The refusal of the mayor is unjustified
because it is not within his power.
Yes. The refusal of the mayor is justified
because the impositions constitute double
taxation.
15. Which of the following is not a scheme of shifting the

incidence of taxation?
a.
b.
c.
d.
The manufacturer transfers the tax to the

consumer by adding the tax to the selling price
of the goods sold;
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;
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;
The manufacturer transfer the sales tax to the
distributor, then in turn to the wholesaler, in turn
to the retailer and finally to the consumer.
16. The following statements are presented to you for

evaluation:
Statement 1 The power of taxation is inherent in
sovereignty being essential to the existence of every
government. Hence, even if not mentioned in the
Constitution, the State can still exercise the power.
Statement 2 The power of taxation is essentially a
legislative function. Even in the absence of any
constitutional provision, taxation falls to Congress as
part of the general power of law-making.
a.
b.
Both statements are correct

Both statements are wrong.

3
c.
d.
The first
statement
The first
statement
statement is correct; the second

is wrong.
statement is wrong; the second
is correct.
17. The City Government of Cebu, claiming that it can

impose taxes under the Local Government Code,
imposed a tax on banks (in addition to the
percentage tax on banks imposed in the National
Internal Revenue Code). The banks within the City
of Cebu objected for the various reasons given
below.
Which would justify the objection of the banks?
a.
b.
c.
d.
The power of taxation cannot be delegated.

The rule of double taxation.
Uniformity in taxation.
None of the above
18. An annual tax of P500.00 was imposed upon all

residents of the Philippines, who are above twentyone (21) years of age, with a gross annual income of
P250,000, whether or not they send their children to
public schools, for the purpose of raising funds in
order to improve public school buildings. The said
tax is:
a.
b.
c.
d.
violative of the equal protection clause of the

Constitution
confiscatory
for a public purpose
a contradiction to the inherent limitations of
taxation
19. Which is NOT an essential characteristic of a tax?

a.
b.
c.
d.
It is unlimited as to amount.
It is a regular payment.
It is proportionate in character.
It is payable in money.
20. Which of the following violates the inherent limitation

of the power of taxation?
a.
b.
c.
d.
A supplier of school supplies for the Department

of Education shifted the value-added tax (VAT),
making the government an indirect taxpayer of
the VAT.
A revenue regulation was issued by the
Department of Finance to amend a mistake
in a tax law.
Income of the United States (US) government in
the Philippines is not subjected to income
taxation.
Resident citizens abroad are taxed on their
income abroad even if they have no income
from the Philippines.
21. A tax does not meet the public purpose limitation if

it:
a.
b.
is for the welfare of the nation or greater portion

of the population
affects the areas as a community rather than as
individuals

c.
d.
is for the benefit principally of limited

subjects or objects
is designed to support the services of
government for some of its recognized objects.
22. Consider the following statements:

I.
The power of taxation involves the promulgation

of rules.
II. The State has the power to impose taxes even
without a constitutional grant.
III. Taxes are based upon the lifeblood theory.
IV. There should be no improper delegation of the
power to tax.
Choose the correct answer from among the following
choices:
a.
b.
c.
d.
Statements I and II are both manifestations of

taxation being legislative in nature.
Statements II and IV are both manifestations of
taxation being legislative in nature.
Statements I and IV are both manifestations of
taxation being inherent in nature.
Statements
II
and
III
are
both
manifestations of the inherent nature of
taxation.
23. Which of the following may not raise money for the
government?
a.
b.
c.
d.
Power of taxation
Eminent domain
Police power
None of the above
24. Taxes are assessed for the purpose of generating

revenue to be used for public needs. Taxation itself is
the power by which the State raises revenue to
defray the expenses of the government.
In our jurisdiction, which of the following statements
may be erroneous?
a.
b.
c.
d.
Taxes are pecuniary in nature.

Taxes are enforced charges and contributions.
Taxes are levied by the executive branch of
government.
Taxes are assessed according to a reasonable
rule of apportionment.
25. Justice Marshall said that the power to tax involves

the power to destroy while Justice Holmes maintains
that the power to tax is not the power to destroy.
Which among the following statements does NOT
reconcile the two seemingly inconsistent opinions?
a.
b.
c.
The imposition of a valid tax could not be

judicially restrained merely because it would
prejudice taxpayers property.
The power to tax could not be the subject
of compensation and set-off.
An illegal tax could be judicially declared invalid
and should not work to prejudice a taxpayers
property.

4
d.
Justice Marshalls view refers to a valid tax while

Justice Holmes view refers to an invalid tax.
26. The proportional contribution by persons and

property levied by the law-making body of the State
by virtue of its sovereignty for the support of the
government and all public needs is referred to as:
a.
b.
c.
d.
Taxes
Special assessment
License fees
Toll fees
27. Which of the following is a similarity among the three

(3) inherent powers of the State?
a.
b.
c.
d.
They are superior to the impairment clause of

the Constitution.
They are means by which the State
interferes with private rights and
properties.
They affect the community as a whole.
They are commonly payable in money.
28. 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.
b.
c.
d.
Specific
Ad valorem
Special or regulatory
Proportionate

a.
b.
c.
d.
An inherent limitation of taxation may be

disregarded by the application of a constitutional
limitation.
The property of an educational institution
operated by a religious order is exempt from
property tax, but its income is subject to income
tax.
The prohibition of delegation by the state
of the power of taxation will still allow the
Bureau of Internal Revenue to modify the
rules on time for filing of returns and
payment of taxes.
The power of taxation is shared by the
legislative and executive departments of
government.
30. Which of the following has no power of taxation?

a)
b)
c)
d)
Provinces
Cities
Barangays
Barrios
31. A tax must be imposed for a public purpose.

of the following is NOT a public purpose?
Which

a.
b.
c.
d.
National defense
Public education
Improvement of the sugar industry
None of the above
32. In year 2002, a person was given by a special law

the privilege to operate a public utility (franchise), in
consideration of which, he was required by that law
to pay a franchise tax. This franchise can be
amended by:
a.
b.
c.
d.
An amendment of that special law only;

An amendment of that special law or a law
of general application;
An amendment of a revenue regulation issued
by the BIR;
None of the above
33. Mr. X is a law-abiding citizen who pays his real estate

taxes promptly. Due to a series of typhoons and
adverse economic conditions, an ordinance was
passed by the City Government of Quezon City
granting a 50% discount for payment of unpaid real
estate taxes for the preceding year and the
condonation of all penalties on fines resulting from
the late payment.
Arguing that the ordinance rewards delinquent
taxpayers and discriminates against prompt ones,
Mr. X demands that he be refunded an amount
equivalent to one-half of the real estate taxes he
paid. The city attorney rendered an opinion that Mr.
X cannot be reimbursed because the ordinance did
not provide for such reimbursement. Mr. X files a
suit to declare the ordinance void on the ground that
it is a class legislation.
Will Mr. Xs suit prosper?
a.
b.
c.
d.
The suit will prosper because the ordinance is

discriminatory in character.
The suit will prosper because the ordinance is
not based on substantial distinction.
The suit will not prosper because taxes are the
lifeblood of the government and should be
collected without unnecessary hindrance.
The suit will not prosper because the
ordinance is based on substantial
distinction. Each set of taxes is a class by
itself and the law would be open to attack
only if all the taxpayers belonging to one
class were not treated alike.
34. Which statement is NOT correct? A revenue bill:

a.
b.
c.
Must originate from the House of

Representatives and on which same bill the
Senate may propose amendments.
May originate from the Senate and on
which same bill the House of
Representatives may propose amendments.
May have a House version and a Senate version
approved separately, and then consolidated,
with both houses approving the consolidation
version.

5
d.
May be recommended by the President to

Congress.
35. The state has complete discretion on the amount to

be imposed, after distinguishing between a useful
and a non-useful activity:
a.
b.
c.
d.
Tax
License fee
Toll
Customs duty
36. Tax evasion is the use of illegal means to avoid

payment of taxes. There is evasion when:
a.
b.
c.
d.
Sales are understated to lessen the VAT.

Indirect taxes are shifted to consumers.
Property is transferred in contemplation of death
to lessen the estate tax.
Depreciation method is used in claiming
deduction to lessen the income tax.
37. Which is the correct and best statement? A tax

reform at any given time underscores the fact that:
a.
b.
c.
d.
Taxation is an inherent power of the state.

Taxation is essentially a legislative power.
Taxation is a power that is very broad.
The state can and should adopt progressive
taxation.
38. Which statement gives the correct answer? That a

feasibility study needs or need not look into taxes of
different political subdivisions of government which
may be alternative sites of the business is because:
a.
b.
c.
d.
Provinces, cities and municipalities must have

uniform taxes between and among themselves.
The local taxes of one political subdivision
need not be uniform with local taxes of
another political subdivision.
Businesses that are subject to national business
taxes are exempt from local business taxes.
Local business taxes may be credited against
national business taxes.

a.
b.
c.
d.
A tax is a demand of sovereignty.

A toll is a demand of ownership.
A special assessment is a tax.
Customs duty is a tax.
40. Congress passed a law revoking all tax exemption

status granted to some taxpayers, except if covered
by the non-impairment clause of the Constitution.
Which of the following principles would best justify
this move by Congress?
a.
b.
c.
Tax exemptions are looked upon with disfavor.

Tax exemptions
are mere privileges
granted by the State.
Tax exemptions are to be construed strictly
against the taxpayer.

d.
Tax exemptions are granted only when there is a

concurrence of a majority of all the members of
Congress.
41. A fundamental rule in taxation is that the property of

one country may not be taxed by another country.
This is known as:
a.
b.
c.
d.
International law
International comity
Reciprocity
International inhibition
42. The City of Manila passed an ordinance imposing a

license fee on all motor vehicles entering the city
between the hours of 8:00 a.m. to 4:00 p.m.
Commuters assailed the validity of the law. If you
were the judge, what would be your ruling? The
ordinance is:
a.
b.
c.
d.
Valid, because it was issued as a source of

revenue
Valid, because it is a legitimate exercise of
police power
Void, because it discriminates against those who
are not able to pay the license fee, particularly,
the low-salaried employee, and is therefore, a
class legislation
Void, because it is not imposed by any other
municipality
43. Which of the following statements is correct?

a.
b.
c.
d.
There is no double taxation by taxing

corporate income and corporate
stockholders dividends from the same
corporation.
The public purpose of tax shall be expressly
stated in a tax measure.
Taxpayers shall pay equal amount of taxes
based on the rule of uniformity and equity in
taxation.
The President has the full power to exempt any
person from taxation.
44. The following statements are presented to you for

evaluation:
Statement No. 1
To be exempt from taxation under the Constitution,
land and building must be exclusively and actually
used for religious, educational or charitable purpose,
even if not directly.
Statement No. 2
Exemptions of non-profit schools are limited only to
revenue and assets derived from strictly school
operations.
a.
b.
c.
d.
Both statements are correct.

Only Statement No. 1 is correct.
Both statements are incorrect.
45. In this power of the state, the person who is parting

with his money/property is presumed to receive a
benefit.
a.
b.
c.
d.
Taxation
Police power
Eminent domain
Both Taxation and Eminent Domain
46. Estate tax is an example of a:

a.
b.
c.
d.
Direct, property, and national tax

Direct, excise, and national tax
Direct, personal, and national tax
Indirect, property, and national tax
47. In all of the following, EXCEPT one, there can be a

classification of the subject matter being required to
shoulder the burden. Which one is the exception?
a.
b.
c.
d.
Tax
License fee
Toll
Eminent domain
48. The phrase There can be no tax unless there is a

law imposing the tax is consistent with the doctrine
or principle of:
a.
b.
c.
d.
Uniformity of taxation;
Due process of law;
Non-delegation of power to tax;
The power of taxation is very broad and the only
limitation is the sense of responsibility of the
members of the legislature to their constituents.
49. Which of the following statements is correct?

a.
b.
c.
d.
Tax law is not valid when its theory

purposes and basis are disregarded.
There can be tax exemption solely on the
ground of equity.
Levying or imposition of taxes is known as tax
administration.
The power to tax includes the power to destroy
in all cases.
50. The exemption of minimum wage earners from

income tax is an illustration of:
a.
b.
c.
d.
Lifeblood theory
Employer-benefit rule
Nature of the power to tax
Benefits-protection theory
51. Which of the following is NOT an element of double

taxation?
a.
b.
c.
d.
Two taxes
Same subject
Same year
Same amount
52. All of the following are forms of escape of taxation

EXCEPT:

6

a.
b.
c.
d.
Transformation
Tax avoidance
Double taxation
Tax evasion
53. Statement 1: Because the power of taxation is

inherent in a state, the inherent limitations on the
power of taxation always apply.
Statement 2: Inherent limitations on the power of
taxation must give way to constitutional limitations.
a.
b.
c.
d.
The first statement is true while the second

statement is false;
The first statement is false while the
second statement is true;
Both statements are true;
Both statements are false.
54. Which statement is NOT correct? The tax should be

based on the taxpayers ability to pay.
a.
b.
c.
d.
As a basic principle of taxation, this is called

theoretical justice,
As a theory of taxation, this is called ability-topay-theory
No person shall be imprisoned for nonpayment of a tax;
A graduated tax table is in consonance with this
rule.
55. Which statement is NOT correct?

a.
b.
c.
d.
A tax is a demand of sovereignty while a toll is a

demand of property ownership;
Non-payment of a tax does not make the
activity taxed unlawful;
A grant of police power to a unit of local
government carries with it a grant of the
power to tax.
Customs duty is a tax.
56. Some franchise holders who are paying the franchise

tax are being required by an amendatory law to pay
the value-added tax, while others remain subject to
the franchise tax. Which of the following
constitutional provisions makes the law
unconstitutional?
a.
b.
c.
d.
No law shall be passed impairing the obligations

of contracts;
The rule on taxation shall be uniform;
No person shall be deprived of property without
due process of law;
None of the above
57. Under this basic principle of a sound tax system, the

Government should not incur a deficit:
a.
b.
c.
d.
Theoretical justice
Administrative feasibility
Fiscal adequacy
Ability-to-pay principle
58. A person may be imprisoned for:

a.
Non-payment of a poll tax

7
b.
c.
d.
Failure to pay a debt

Non-payment of his income tax
Failure to pay his community tax
59. Taxes are what we pay for civilized society. Without

taxes, the government would be paralyzed for lack of
the motive power to activate and operate it. This
describes the principle of:
a.
b.
c.
d.
Reciprocity
Revenue Raising
Honesty and Fairness
Protection and Benefit
60. Diplomatic
and
consular
representatives
are
exempted from the Community Tax Certificate. The
exemption adheres to the principle of:
a.
b.
c.
d.
Situs of taxation
International comity
Tax exemption of dignitaries
Immunity of government from taxes
61. In order to raise more funds for the government, a

value-added tax (VAT) on toll fees was imposed. Is
it valid?
a.
b.
c.
d.
No, because it would amount to direct duplicate

taxation.
Yes, because toll fees are collected by private
corporations; thus, there is no prohibition to tax
the same.
Yes, because toll fees are charges
demanded by reason of ownership; thus, it
may be the subject of a tax.
No, because toll fees are equivalent to taxes;
thus, to impose a tax on toll would be
amounting to a violation of due process.
62. The rule in taxation that the property of a Filipino

taxpayer in the United States cannot be taxed in the
Philippines is a recognition of the principle of:
a.
b.
c.
d.
Reciprocity
Territoriality
International Law
International Comity
63. Citing Section 10, Article VIII of the 1987

Constitution which provides that salaries of judges
shall be fixed by law and that during their
continuance in office their salary shall not be
decreased, a judge of a Regional Trial Court
questioned the deduction of withholding taxes from
his salary since it results into a net deduction of his
pay.
Is the contention of the judge correct?
a.
b.
No. The contention is incorrect because taxes

are enforced contributions.
No. The contention is incorrect because taxes
must be collected in order to support the
government.

c.
d.
No. The contention is not correct because

deduction of withholding taxes is not a
diminution contemplated by the
Constitution.
No. The contention is incorrect because
deduction of withholding taxes is required by
law.
64. As to who bears the burden, a community tax is a

a.
b.
c.
d.
Personal tax
Direct tax
Ad valorem tax
Local tax
65. As a basic principle of taxation, that Taxes must be

based on the taxpayers ability to pay is called:
a.
b.
c.
d.
Equality in taxation
Ability to pay theory
Theoretical justice
Equity in taxation
66. Which is not an essential characteristic of tax?

a.
b.
c.
d.
It is unlimited as to amount.
It is payable in money.
It is proportionate in character.
It is a regular payment.
INCOME TAX
67. The Optional Standard Deduction (OSD) that may be
claimed by a resident alien in computing his or her
taxable income is equivalent to:
a.
b.
c.
d.
e.
10% of gross sales or gross receipts

40% of gross income
Zero, because only resident citizens, nonresident citizens, and domestic corporations are
allowed by law to claim OSD
40% of gross sales or gross receipts
10% of gross income
68. Which of the following corporations is subject to the

Minimum Corporate Income Tax (MCIT)?
a.
b.
c.
d.
Proprietary educational institutions

Resident foreign corporations
Domestic corporations subject to special tax
rates
Offshore banking units
69. Which statement is NOT correct?

a.
b.
A resident citizen and a resident alien are

subject to a final tax of 7.5% on interest on
foreign currency deposits under the expanded
foreign currency deposit system.
A non-resident citizen is exempt from income
tax on interest on foreign currency deposit
under the expanded foreign currency deposit
system.

8
c.
d.
A non-resident alien engaged in business in

the Philippines has a final tax of 20% on
interest only if the interest is on the bank
deposits.
A non-resident alien engaged in business in the
Philippines is subject to a final tax of 20% on
dividends received from domestic corporations.
70. Under the National Internal Revenue Code, the term

corporation excludes not only general professional
partnerships, but also:
a.
b.
c.
d.
Joint stock companies

Insurance companies
Joint accounts or cuentas en participacion
Joint venture formed for the purpose of
undertaking construction projects
71. Which of the following distinguishes

Deductions from Personal Exemptions?
a.
b.
c.
d.
Allowable
Allowed to cover personal, family, and living

expenses
Arbitrary amounts allowed by law
Can be claimed only by individual taxpayers
Enables the taxpayer to recoup his/its cost
of doing business
72. Which of the following statements about Minimum

Corporate Income Tax (MCIT) is NOT correct?
a.
b.
c.
d.
The MCIT is imposed on a taxable

corporation beginning on the fourth taxable
year of the corporations business
operations.
The imposition of the MCIT on a corporation may
be suspended by the Secretary of Finance on the
ground of legitimate business reverses.
If the MCIT is applicable, it should be computed
and paid quarterly at the time of filing of the
quarterly corporate income tax.
A resident foreign corporation is subject to MCIT.
73. The Improperly Accumulated Earnings Tax (IAET)

shall be applicable to which of the following
corporations?
a.
b.
c.
d.
Insurance companies
Taxable joint ventures
Banks
Taxable partnerships
74. Statement 1 Value Added Tax is a property tax.

Statement 2 Estate Tax is a direct tax.
a.
b.
c.
d.

The first statement is correct; the second
statement is wrong.
The first statement is wrong; the second
statement is correct.

75. Under the National Internal Revenue Code of 1997,

as amended, regional or area headquarters of
multinational companies shall pay a tax of:
a.
b.
c.
d.
10% of their taxable income

30% of their gross income
30% of their taxable income
None, because they are
income tax
exempt
Statement 1 Is taxed at 25% of gross income

from within the Philippines.
Statement 2 Is entitled to personal
exemptions on the basis of reciprocity.
d.

statement is wrong.
77. A citizen of the Philippines was a non-resident citizen

in year 2008. On May 15, 2009, he arrived in the
Philippines to reside permanently in the Philippines.
His income for the year 2009 were as follows:
b.
c.
d.
b.
c.
d.
d.
a.
b.
c.
d.
b.
the
following
statements
is
NOT
He is considered a resident citizen on his

A and B income.
He is considered a resident citizen on his B
income.
He is considered a non-resident citizen on his A
income.
He is not taxable on his A income.
A general partnership in trade shall not be

treated as a corporation for tax purposes.
A co-ownership where the activities of the coowners are limited to the preservation of
property and collection of income from the
property shall not be treated as a corporation for
tax purposes.
A co-ownership by investment of labor or capital
shall be treated as a corporation for tax
purposes.
A
regional
operating
headquarter
of
a
multinational company may earn income from
the Philippines.
79. Which of the following is taxable?

9
Stock dividends declared by a domestic

corporation received by a resident citizen
Property dividends declared by a domestic
corporations received by a resident foreign
corporation
Cash dividends declared by non-resident foreign
corporations received by resident citizens
Property dividends declared by a domestic
corporation received by a non-resident
alien engaged in trade or business in the
Philippines
81. A stock dividend is not taxable
Which
of
Separation pay received by a 50-year old

employee due to the retrenchment program of
the employer.
Retirement pay received from a benefit
plan registered with the BIR where at the
time the employee retired, he was 55 years
old, retiring from employment for the first
time in his life, and was employed with the
employer from whom he is retiring for 5
years prior to retirement.
Social security benefit received by a balikbayan
from his employer abroad at the age of 35.
SSS and GSIS benefits.
80. Which of the following is subject to Philippine final

income taxes?
a.

a.
c.
A From January 1, 2009 to May 14, 2009;

B From May 15, 2009 to December 31, 2009.
correct?
a.
b.
from
76. A non-resident alien not engaged in business in the

Philippines, but with income from the Philippines:
a.
b.
c.
a.
c.
d.
If there is no resulting change in the

proportionate interest of the shareholders in the
net assets of the corporation.
If there was only one class of stock issued and
outstanding at the time of the dividend.
Since it is only capitalization of the accumulated
profits (retained earnings).
All of the above.
82. The fringe benefit tax is NOT:

a.
b.
c.
d.
a final tax to be withheld by the employer

an employees benefit supplementing a
money wage or salary
to be paid on or before the 10th day of the
month following the calendar quarter in which
the fringe benefit was granted
an expense deductible from the gross income of
the employer
83. Which of the following is NOT a correct principle of

individual income taxation?
a.
b.
c.
Resident Filipino citizens are taxable on all

income from sources within and without the
Philippines.
Non-resident citizens are taxable only on income
from sources within the Philippines.
Overseas Contract Workers (OCW) are
taxable only on income from sources
without the Philippines.

d.
An alien individual, whether a resident or not of

the Philippines, is taxable only on income from
sources within the Philippines.
84. Statement 1 Income derived from an unlawful

source is always taxable.
Statement 2 Income derived from lawful source
may or may not be taxable.
a.
b.
c.
d.

statement is wrong.
85. Which of the following statements regarding capital

assets is/are correct?
a.
b.
c.
d.
89. Mr. Quiambao is a non-resident alien based in Hong

Kong. During the calendar year 1999, he came to
the Philippines several times and stayed in the
country for an aggregates period of more than 180
days. How will Mr. Quiambao be taxed on his income
derived from sources within the Philippines and from
abroad?
a.
Statement 1 The sale of shares of stock of a

domestic corporation not listed through a local stock
exchange is subject to the capital gains tax if the
sale results in a net capital gain.
b.
Statement 2 The sale of real property in the

Philippines shall be subject to the capital gains tax
even if it resulted in a loss.
c.
a.
b.
c.
d.
d.

statement is wrong.
86. On general rules on capital gains and losses, which

of the following statements is NOT true?
a.
b.
c.
d.
Capital gains and losses of corporations are

always recognized in full.
The net capital loss of one year can be
carried over to the succeeding year by a
corporation.
Capital losses are always deductible only against
capital gains.
The recognition of capital gains and losses for
individuals takes into account the holding period
of the capital asset.
87. All of the following statements are correct EXCEPT

one. Which one is the exception?
a.
b.
c.
d.
Income from personal service is considered

derived from the country where the services
were rendered.
Rents or royalties are considered derived from
the country where the property is located.
Income from sale of property is considered
derived from the country where the property is
located.
The source of interest income is the
country where the creditor resides.
88. The following fringe benefits are not taxable EXCEPT:

10
Those which are authorized and exempted under

special laws
Contributions of the employer for the
benefit of the employee to retirement,
insurance, hospitalization benefit plans,
holiday and vacation expenses
Those benefits given to rank-and-file employees
De minimis benefits
He is deemed to be a non-resident alien doing

business in the Philippines. Hence, shall be
subject to an income tax on taxable income
received from all sources within and without the
Philippines.
He is deemed to be a non-resident alien
doing business in the Philippines. Hence, he
shall be subject to an income tax on
taxable income received from all sources
within the Philippines.
He is deemed to be a non-resident alien not
doing business in the Philippines. Hence, shall be
subject to income tax on taxable income
received from all sources within the Philippines.
He is deemed to a non-resident alien not doing
business in the Philippines. Hence, shall not be
subject to an income tax.
90. Cash dividends received from a domestic corporation

are subject to a final tax of 10% if such dividends
are received by a:
a.
b.
c.
d.
Resident foreign corporation

Non-resident alien engaged in trade or
business in the Philippines
Resident alien
Non-resident alien not engaged in trade or
91. The following statements pertaining to Optional

Standard Deductions (OSD) are correct, EXCEPT:
a.
b.
c.
d.
OSD is available only to citizens and

resident aliens.
Proof of actual expenses is not required.
The amount of standard deduction is limited
to 40% of the taxpayers gross income or
gross sales, as the case may be.
The election of OSD is revocable for the
year in which made, such that he can
change it to itemized deductions.
92. Mr. Ortega owns a 5-door apartment with a monthly

rental of P 10,000 each residential unit. Later, he
sold such property for it is not anymore generating
income. The value of the property before sale was
P10M and was sold at P7.5M. Is Mr. Ortega liable to
pay the capital gains tax?

a.
b.
c.
d.
Yes, because the property sold is a capital asset,

located in the Philippines and not used in
business as it ceases to be profitable.
Yes, because the property sold is a capital asset
in contemplation of law and the capital loss is
immaterial since again is presumed for sale.
No, because the property sold is an
ordinary asset which is real property used
in business.
No, because the apartment is considered to be a
principal residence where sale thereof entitles
the owner of the benefit of the exemption.
93. Which is an application of the tax benefit rule?

a.
b.
c.
d.
Taxpayer declares as taxable income

subsequent recovery of bad debts in the
year they were collected to the extent of
the benefit enjoyed by the taxpayer when
the bad debts were written-off and claimed
as deduction from gross income.
Reserves for bad debts are set up to be charged
off during the taxable year as deduction from
gross income.
Income tax erroneously paid but which were
subsequently refunded or credited.
Taxpayer is required to report as taxable income
the subsequent tax refund or tax credit of
overpayment of value-added tax.
94. Which of the following donations cannot have full

deductibility?
a.
b.
c.
d.
Donations to the Philippine Government or

to any of its agencies or political
subdivisions,
including
fully-owned
government
corporations
undertaking
priority activities as approved by the
Department
of
Social
Welfare
and
Development.
Donations to foreign institutions or international
organizations
to
whom
the
Philippine
Government has treaties or commitments with
or covered by special laws.
Donations to NGOs accredited by the Philippine
Council for NGO Certification.
Both choices (B) and (C)
95. Mr. X, a Filipino citizen who has been working in

America for 20 years, owns a house and lot therein.
As he was desirous to go back to the Philippines for
good, he sold his property to an American citizen
here in the Philippines prior his return therein thru
his agent. Should Mr. X include the income realized
from the sale of the property in his return?
a.
b.
c.
No, since Mr. X was a non-resident citizen

who is only taxed for his income within the
Philippines.
Yes, because the sale took place in the
Philippines and thus enjoyed the protection of
the Philippine government.
No, since such sale is subject to capital gains tax
(final tax).

11
d.
Yes, because such income is a part of Mr. Xs

gross income as it was a sale of capital asset
found abroad.
96. Mr. Martinez is an employee of XYZ Corporation for

five (5) years. At the age of fifty (50), he retired
from his work. Mr. Martinez received from the
corporation his retirement benefits under the
companys BIR-approved private benefit plan. Will
such benefits or pension be subject to tax?
a.
b.
c.
d.
Yes, it is subject to tax since Mr. Martinez

had not satisfied the ten-year-requirement
to avail the tax exemption.
No, such pension is tax exempt because Mr.
Martinez had already served the company for
five years.
Yes, because he must be at least 60 years old to
avail the tax exemption.
No, since Mr. Martinez is already 50 years old
when he retired.
97. Mr. and Mrs. Perez are both employees. The gross
compensation income, net exclusions, of Mr. Perez
was P120,000 and the gross compensation income,
net exclusions of Mrs. Perez was P120,000. They
have a qualified dependent child, Albert. Mr. Perez
paid a premium of P2,000 on a hospitalization
insurance on himself, Mrs. Perez and Albert. Who is
the proper claimant of the additional exemption?
a.
b.
c.
d.
Mr. Perez alone

Mrs. Perez alone
Either Mr. Perez or Mrs. Perez
Neither Mr. Perez nor Mrs. Perez
98. Which statement is correct?

a.
b.
c.
d.
Taxes paid or accrued within the taxable year in

connection with the taxpayers trade or business
or exercise of a profession, are excluded from
deductions on gross income.
Taxes paid or accrued within the taxable
year in connection with the taxpayers
trade or business or exercise of a
profession, are deductible from gross
income.
or exercise of a profession, are excluded from
deductions on net income.
or exercise of profession, are deductible from
net income.
99. De minimis benefits are one of those fringe benefits

which are not subject to tax. Which of the following
statements does not define de minimis benefits?
a.
b.
c.
These consist of facilities and privileges

furnished or offered by an employer.
There are relatively small in value.
These are taxable when received by
managerial or supervisory employees.

d.
These are offered by the employer merely as a

means of promoting health, goodwill and
contentment or efficiency of his employee.
100.
The following statements are true about fringe
benefits and fringe benefits tax, EXCEPT:
a.
b.
c.
d.
Fringe benefit given to a rank-and-file employee

is not subject to the fringe benefit tax.
Fringe benefit given to a supervisory or
managerial employee is subject to the fringe
benefit tax.
Fringe benefit tax is not imposed on de minimis
benefits,
whether
given
to
rank-and-file
employees or to supervisory or managerial
employees.
Fringe benefit tax can be imposed on
resident citizens only.
101.
On November 10, 2010, Mr. and Mrs. Henares
sold their principal residence in Makati City for P
6,500,000. The following requirements must be met
in order that the capital gains presumed to have
been realized from such sale may not be subjected
to the 6% capital gains tax, EXCEPT:
a.
b.
c.
d.
They must inform the BIR of the intention of to

avail of the tax exemption within thirty (30)
days from the date of sale
They must fully utilize the proceeds of the
said sale to acquire or construct a new
principal residence immediately
The property sold must not be used in business.
They can only avail of the tax exemptions once
every ten (10) years.
102.
All of the following corporations below are
exempt from income tax EXCEPT:
a.
b.
c.
d.
Philippine Health Insurance Corporation (PHIC)

Philippine
Amusement
and
Gaming
Corporation (PAGCOR)
Local Water Districts
Philippine Charity Sweepstakes Office (PCSO)
103.
The Optional Standard Deduction (OSD), which
is a deduction from gross income allowed to be taken
in lieu of the itemized deductions, is:
a.
b.
c.
d.
not available against compensation income

of an individual taxpayer arising out of an
employer-employee relationship
not available to an individual taxpayer who is a
self-employed resident alien
available against compensation income of an
individual taxpayer arising out of an employeremployee relationship
available to an individual taxpayer who is a selfemployed non-resident alien
104.
Which of the following income items earned by
Mr. Roxas, a resident citizen, shall be included in the
Gross Income for income tax computation
purposes?

12
Realized Gain from

Redemption of
Shares in Mutual Fund
a.
b.
c.
d.
Included
Excluded
Included
Excluded
Realized Gain from

Sale of Bonds
with Maturity of Five Years
Excluded
Excluded
Included
Included
105.
Under Philippine tax laws, which of the following
transactions shall NOT be subject to tax on
dividends?
a.
b.
c.
d.
Property dividends paid by a domestic

corporation
to
a
resident
foreign
corporation.
Cash dividends received by a non-resident
foreign corporation from a domestic corporation.
Property dividends paid by a domestic
corporation to a non resident citizen
Partners share in the distributive income of a
business partnership.
106.
Mr. Ichiro Suzuki, a Japanese citizen who has
stayed in the Philippines for more than a year, is the
General Manager of Olympus Philippines Corporation
(referred herein as Olympus Philippines), a
domestic corporation and a wholly-owned subsidiary
of Olympus Japan Ltd. (referred herein as Olympus
Japan), a foreign corporation based in Japan. The
split-pay arrangement is adopted by Olympus
Philippines for expatriates, in which a portion of their
salaries is paid outside the Philippines. As general
manager, Mr. Suzuki receives a compensation of P
60,000 per month from Olympus Philippines, and he
also receives 125,000 yen per month from Olympus
Japan, which is paid through his bank account in
Tokyo, Japan, the place where his family resides. If,
for income tax purposes, Mr. Suzuki is treated as a
non-resident alien engaged in business in the
Philippines, should his compensation from Olympus
Japan be declared as taxable gross income in the
Philippines?
a.
b.
c.
d.
No, because the compensation was paid by a

foreign corporation, hence it is considered an
income derived from sources outside the
Philippines.
Yes, because Mr. Suzuki has been in the
Philippines for more than 180 days, hence, he is
taxable on all income derived from sources
within and outside the Philippines.
Yes, because the compensation was paid in
connection with services rendered in the
Philippines, hence, it is considered income
derived
from
sources
within
the
Philippines.
No. Even if the compensation was paid in
connection with services rendered in the
Philippines, it was paid through Mr. Suzukis
bank account in Japan, hence, it is not
considered income derives from sources within
the Philippines.
107.
Edwin is a minimum wage earner working at
Kudos Metal Corporation. During the year 2010, in
addition to his basic salary, he also received holiday

pay, overtime pay, night shift differential pay, and

hazard pay. He received a hazard pay in view of the
risky nature of his job as a production worker of the
said corporation.
Which of the aforementioned
income received by Edwin is/are taxable?
a.
b.
c.
d.
Only the hazard pay and the night shift

differential pay
None of the income received by Edwin is
taxable
Only the night shift differential pay
Only the hazard pay
108.
A stock dividend received from a domestic
corporation by a non-resident alien not engaged in
trade or business in the Philippines and subsequently
redeemed by the former is:
a.
b.
c.
d.
Subject to income tax

Not subject to income tax
Is not considered income within the Philippines
Is income sourced partly within the Philippines
and partly without the Philippines
109.
A minimum wage earner who receives additional
compensation on his part-time teaching in three (3)
vocational schools and from his real estate brokers
commissions will be taxed:
a.
b.
c.
d.
110.
a.
b.
c.
d.
Only as to the other income sources

On the minimum wage only
On the additional income sources but exempted
on the minimum wage
On all the income with respect to the
minimum wage and the additional income
sources
b.
c.
d.
114.
a.
b.
c.
d.
a.
b.
d.
Cohan Rule

13
Hospitals
International carriers
Offshore banking units
Resident foreign corporations
Which of the following is NOT taxable?
Proceeds of life insurance received by a
revocable beneficiary after the death of the
insured
Amount received as compensation for unrealized
salary for 3 months, whether by suit or
agreement, on account of an accident.
Proceeds of life insurance received by an
irrevocable beneficiary after the death of
the insured.
Sale of lot which is a capital asset located in the
Philippines.
115.
Tiffany Rodriguez, a resident alien employed in a
domestic corporation, was separated due to her
falling eyesight.
She was given P 50,000 as a
separation pay. She contended that such pay is not
taxable. Is her contention correct?
Salaries received by a manager for services

rendered in a factory in the Philippines
Interest received by a resident citizen (Filipino)
from a loan agreement signed in the Philippines
by a debtor, who is a Canadian resident
Money received through bribery
Interest received by a Canadian resident
from a loan agreement signed in Canada by
a resident citizen (Filipino).
112.
Which of the following is NOT for the benefit of
the taxpayer?
a.
a.
b.
c.
d.
c.
Winnings from lottery, raffle draws in the

Philippines
Royalty income from copyright used in the
Philippines
Prizes from a sports contest in the
Philippines amounting to P10,000
Cash dividends received by individuals from
domestic corporations
All Events Test

Substantiation Rule
Optional Standard Deductions
113.
Which of the following is subject to the minimum
corporate income tax (MCIT)?
The following are taxable EXCEPT:
111.
Which of the following is not passive income
subject to final tax?
a.
b.
c.
d.
Yes, because her separation is due to her

disability, hence, involuntary and for a
cause beyond her control.
No, because her separation is due to her
disability, hence, a cause attributable to her own
incapacity.
Yes, because the separation pay is an income
derived from sources within the Philippines.
No, because the income of aliens is not subject
to tax.
116.
Mirador, Inc., a domestic corporation, filed its
Annual Income Tax Return for its taxable year 2008
on April 15, 2009. In the Return, it reflected an
income tax overpayment of P1,000,000.00 and
indicated its choice to carry-over the overpayment as
an automatic tax credit against its income tax
liabilities in subsequent years.
On April 15, 2010, it filed its Annual Income Tax
Return for its taxable year 2009 reflecting a taxable
loss and an income tax overpayment for the current
year 2009 in the amount of P500,000.00 and its
income tax overpayment for the prior year 2008 of
P1,000,000.00.
In its 2009 Return, the corporation indicated its
option to claim for refund the total income tax
overpayment of P1,500,000.00.
Choose which of the following statements is
correct:

a.
b.
c.
d.
Mirador, Inc. may claim as refund the total

income tax overpayment of P1,500,000.00
reflected in its income tax return for its taxable
year 2009.
Mirador, Inc. may claim as refund the
amount of P500,000.00 representing the
income tax overpayment for its taxable
year 2009.
No amount may be claimed as refund.
Mirador, Inc. may claim as refund the amount of
P1,000,000.00 representing the income tax
overpayment for its taxable year 2008.
117.
Foreign income
corporation
a.
b.
c.
d.
taxes
paid
by
foreign
May be claimed either as a deduction or as a

credit, at the option of the corporation.
May be claimed only as a deduction or as a tax
credit, whichever has the lower amount.
May be claimed as a tax credit only.
Do not qualify either as a deduction or as a
tax credit.
118.
Which of the following income payments is
subject to final withholding tax?
a.
b.
c.
d.
Dividends received by a domestic corporation

from a domestic corporation
Interest income on dollar deposit of a nonresident alien
Interest on long-term deposits with maturity
period exceeding 5 years
Tax informers reward
119.
Statement 1 Only business expenses may be
deducted from the gross income of taxpayers.
Statement 2 Itemized deductions from the gross
income should be duly supported by vouchers or
receipts.
a.
b.
c.
d.
Only Statement 1 is correct.

Only Statement 2 is correct.
Both statements are incorrect.
120.
Manny agreed to sell his condominium unit to
Ricky for 3 million pesos. At the time of the sale, the
property has a zonal value of 2.5 million pesos.
Upon the advice of a tax consultant, the parties
agreed to execute two deeds of sale, one indicating
the zonal value of 2.5 million pesos as the selling
price and the other, showing the true selling price of
3 million pesos. The tax consultant filed the capital
gains tax return using the deed of sale showing the
zonal value of 2.5 million pesos as the selling price.
What is the tax implication of the action taken by the
parties?
a.
b.
The capital gains tax due on the sale shall be

based on the 2.5 million pesos.
The capital gains tax due on the sale shall
be based on the actual selling price of 3
million pesos, which is higher than the
zonal value of the property.

14
c.
d.

based on the opinion of the tax consultant.
based on either of the two amounts.
121.
Interest income received by a non-resident
citizen from a depository bank under the expanded
foreign currency deposit system shall be:
a.
b.
c.
d.
Subject to final tax of 10% of such interest

income
Subject to final tax of 7.5% of such interest
income
Subject to final tax of 20% of such interest
income
Exempt from tax
122.
On January 3, 2008, Mr. X, a Filipino residing in
the Philippines, purchased one hundred (100) shares
of the capital stock of ABC Corporation, a domestic
company. On January 3, 2010, ABC Corporation
declared, out of profits of the company earned after
January 1, 2008, a hundred percent (100%) stock
dividends on all stockholders record as of December
31, 2009 as a result of which Mr. Xs holding in ABC
Corporation became two hundred (200) shares. Are
the stock dividends received by Mr. X subject to
income tax?
a.
b.
c.
d.
Yes. Stock dividends are taxable as provided in

the Tax Code.
Yes. Stock dividends are taxable since they are
realized income.
No. Stock dividends are not taxable even if
these are equivalent to cash and property
dividends.
No.
Stock dividends are not realized
income and are exempt from income tax.
123.
Mr. Celso Angeles is a big-time swindler. In one
year, he was able to earn P2,000,000 from his
swindling activities.
When the Commissioner of
Internal Revenue discovered his income from
swindling, the Commissioner assessed him a
deficiency income tax for such income. The lawyer
of Mr. Angeles protested the assessment on the
ground that income tax applies only to legal income,
not to illegal income. Is the contention of the lawyer
of Mr. Angeles correct?
a.
b.
c.
d.
No, the illegality of the income will not

preclude the imposition of the income tax
thereon.
Yes, the illegality of the income will preclude the
imposition of the income tax thereon.
Yes, the BIR is without jurisdiction to impose
taxes on illegal income.
It depends on whether after the imposition of
the tax, there will be anything left to return to
the victims of the swindling activities.
124.
Statement 1 If the lessor is a citizen, resident
alien, or a non-resident alien engaged in trade or
business in the Philippines, his net income shall be
subject to the graduated income tax rates.

Statement 2 If the lessors are husband and wife,

they shall compute jointly their individual income tax
based in their taxable income.
a.
b.
c.
d.
Both statements are true

Statement 1 is true; Statement 2 is false
Both statements are false
Statement 1 is false; Statement 2 is true
125.
Employers shall pay for fringe benefits given to
the following employees, EXCEPT:
a.
b.
c.
d.
Sorter
Branch manager
Team leader
Operations supervisor
126.
What is the tax treatment of fringe benefits
given to rank-and-file employees?
a.
b.
c.
d.
They are part of compensation income

subject to income tax and withholding
tax.
They shall be imposed a final tax of 32% on
their grossed-up monetary value.
They are exempt from tax.
None of the above.
127.
An individual engaged in business earned net
income which is less than his personal and additional
exemptions during the year. Is he required to file an
income tax return?
a.
b.
No, because he is not liable for any tax.

Yes, because he is required to file a tax
return notwithstanding such loss.
c. Yes, because he still incurs income tax
liabilities notwithstanding the foregoing
facts,
d. No, because individual taxpayers whose
gross income is less than his personal
exemptions need not file tax returns.
128.
The Philippine Charity Sweepstakes Office
(PCSO) gives its supervisor transportation and meal
allowances during their duty of inspecting lotto
franchise holders. The said allowance is
a.
b.
c.
d.
Not taxable as it is required by the nature

of the business.
Taxable by 32% on its grossed-up monetary
value.
Taxable as compensation income on the part of
the supervisors.
None of the above
129.
Born of poor family on February 14, 1950, Mario
worked his way through college. After working for
more than 12 years in XYZ Manufacturing Corp., he
decided to retire on January 30, 1999, and avail of
the benefits under the very reasonable retirement
plan maintained by his employer. Is this retirement
benefit subject to income tax?

15
a.
b.
c.
d.
Yes, because he failed to qualify the age

requirement of not less than 50 years old.
No, all retirement benefits are not subject to
tax.
No, the BIR would allow one year short of the
age requirement. Thus, not taxable.
Yes, because all income from within the
Philippines are taxable.
130.
Interest income earned by a resident Filipino
outside the Philippines is:
a.
b.
c.
d.
Subject to the scheduler tax rate

Subject to a final withholding tax
Subject to 15% special tax rate
Not subject to income tax
131.
A loss in one line of business is not permitted as
a deduction from gain in another line of business.
This is known as the:
a.
b.
c.
d.
Cohan rule
Tax benefit rule
All events test rule
Marcelo Steel doctrine
132.
The following taxpayers are allowed to claim
personal exemptions, EXCEPT:
a.
b.
c.
d.
Resident Aliens engaged in trade or business

Estates and Trusts
Resident Citizens
Non-resident Aliens not engaged in trade or
business.
133.
Mr. Lee is a non-resident alien based in Hong
Kong. During the calendar year 2009, he came to
the Philippines several times and stayed in the
country for an aggregated period of more than 180
days. What kind of taxpayer is Mr. Lee for taxable
year 2009?
a.
b.
c.
d.
A non-resident alien doing business in the

Philippines.
A resident alien
A non-resident alien not doing business in the
Philippines.
A non-resident alien partly doing and partly not
doing business in the Philippines.
134.
Under Republic Act No. 9520, otherwise known
as the Philippine Cooperative Code of 2008, what is
the tax treatment of the interest paid by
cooperatives on the savings and time deposits of
their members?
a.
b.
c.
d.
Subject to 20% final tax

Exempt from tax
135.
Which of the following statements below is
correct regarding taxation of estates and trusts?

a.
b.
c.
d.
Income of estates or any kind of property

held in trust shall be taxable to the grantor
if the instrument is revocable.
Income of estates or any kind of property held in
trust shall be taxable to the grantor if the
instrument is irrevocable.
Income of estates or any kind of property held in
trust shall be taxable to the fiduciary if the
instrument is revocable.
Income tax imposed upon corporations shall also
apply to the income of estates or of any kind of
property held in trust.
136.
The improperly accumulated earnings tax (IAET)
shall NOT apply to:
a.
b.
c.
d.
Taxable joint ventures

Pharmaceutical companies
Banks and insurance companies
Proprietary educational institutions
137.
Interest income from foreign currency loan
extended to a Philippine domestic corporation
received by a non-resident alien engaged in trade or
business is:
a.
b.
c.
d.
d.
139.
What is the tax treatment of a scholarship grant
to a rank-and-file employee by an employer if the
study involved is directly connected with the
employers business?
a.
b.
c.
d.
It shall not be treated as fringe benefit,

following the employers convenience
rule and in furtherance of business.
It shall not be treated as fringe benefit because
it is only a de minimis benefit.
It shall be treated as fringe benefit pursuant to
Sec. 33 of the Tax Code.
It shall be treated as fringe benefit since it
improves an employees educational attainment.
140.
On general income taxation, which statement is
NOT correct?
a.
Exempt from income tax

Subject to a final tax of 25%
Subject to a final tax of 7.5%
Subject to a regular tax from 5%-32%
(schedular tax rate)
b.
138.
In his income tax return for the year 2010, Mr.
Cecilio Sison claimed the following items as
deductions from his gross income.
d.
A.
B.
All items, except the amount paid to the LTO for

the registration of his car, are deductible
because they are considered as allowable
deductions from gross income.
c.
Non-resident aliens, whether engaged in

trade or business or not, are taxed on their
gross income.
An individual citizen, either resident or nonresident, and an individual resident alien are
taxed similarly.
A non-resident alien engaged in trade or
business is generally subject to the same income
tax rate as a citizen and resident alien.
A non-resident alien who is not engaged in trade
or business is taxed differently from the other
individual taxpayers.
Real estate tax paid on his house and lot

Depreciation of the car used in going to and
from office
Interest paid on a loan the proceeds of which he
used in the construction of his house
Amount paid to the LTO for the registration of
his car
Contribution paid to a religious organization
Loss of wifes jewelry through robbery
141.
Which of the following items forms part of gross
income?
The income of Mr. Sison was derived solely from his

employment as an executive of a private bank.
Which of the items mentioned may be allowed or
disallowed as deductions from his gross income?
142.
Cash dividends received from a domestic
corporation by Mr. Roberts, a non-resident alien
engaged in business in the Philippines, is subject to:
C.
D.
E.
F.
a.
b.
c.
All items enumerated are non-deductible

and if included in the return, they are
disallowed because Mr. Sison is only
allowed
personal
and
additional
exemptions.
All the items enumerated are deductible since
they constitute items allowed as deductions from
gross income.
All the items enumerated are deductible from his
gross income since all were incurred during the
taxable year and are reasonable and necessary
expenses.

16
a.
b.
c.
d.
a.
b.
c.
d.
Dividends
received
by
a
domestic
corporation from a foreign corporation
The proceeds of a life insurance received by a
child as an irrevocable beneficiary
Interest on deposit with a local bank
13th month pay and de minimis benefits
10% final tax of the gross amount of the

dividend.
dividend.
dividend.
the schedular tax rates under the Tax Code
because such item forms part of Gross Income.
143.
Due to the worthlessness of its investment in
West Corporation, East Corporation decided to claim
the value of the said worthless investments as bad
debts, relying on the provisions of Section 34 (E)(2)
of the National Internal Revenue Code (NIRC) of
1997, after writing the same off in its books.

Comment on
Corporation.
a.
b.
c.
d.
this
procedure
adopted
by
East
The procedure adopted is in accord with the

NIRC, if East Corporation exercised all
reasonable means of recovering the investment.
The procedure adopted is in accord with the
NIRC,
since
worthless
investments
are
considered as indebtedness resulting in bad
debts.
The procedure adopted is not in accord with the
NIRC, because worthless investments are
classified as ordinary losses and not bad debts.
The procedure adopted is not in accord
with the NIRC, since worthless investments
are not considered as indebtedness which
would result in bad debts.
144.
Mr. A is indebted to Mr. B in the amount of
P100,000. For the services rendered by Mr. C, the
brother of Mr. A, in favor of Mr. B, Mr. B forgave the
indebtedness of Mr. A. What is the income tax
consequence of this transaction?
a.
b.
c.
Mr. C shall be liable to donors tax.

There is no income tax consequence for all
parties.
Only Mr. C shall declare an income in the
amount of P100,000. No income tax
consequence for Mr. A and Mr. B.
d. Only Mr. A shall declare an income in the
amount of P100,000. No income tax
consequence for Mr. B and Mr. C.
145.
Mr. A took a life insurance policy for P100,000,
naming his wife as beneficiary. Under the terms of
the policy, the insurer will pay Mr. A the amount of
P100,000 after the 20th year of the policy, or will pay
his beneficiaries, should he die before that date. Mr.
A outlived the policy and received P100,000. The
premium paid on the policy was P85,000. Is the
P100,000 received by Mr. A subject to tax?
a.
b.
c.
d.
Of the P 100,000, the sum of P 85,000 is

not subject to tax, being received by him as
return of premiums paid upon the
insurance contract; the remaining P15,000
is taxable as it represents earnings of his
premium.
The P100,000 representing the total amount of
the proceeds of the life insurance, is not taxable.
The P100,000 representing the proceeds of the
life insurance is taxable, because A outlived the
insurance policy.
The P100,000 is taxable as the proceeds of a life
insurance must be paid to the beneficiaries upon
the death of the insured for it to be deductible
from gross income.
146.
Under this test, the accrual of income and
expenses for income tax computation purposes is
permitted if the right to income or liability has been
fixed, and the amount of such income or liability can
be determined with reasonable accuracy. This test is
called:

17
a.
b.
c.
d.
Immediacy test
Rational basis test
All events test
Realization test
147.
Mr. Anderson, an American citizen residing in
Australia, came to the Philippines in October 2010 for
a two-week vacation in one of the well-known
resorts in the country.
During his stay in the
Philippines,
he
won
the
Philippine
Charity
Sweepstakes Office (PCSO) Grand Lotto jackpot prize
amounting to approximately P250,000,000. What is
the tax treatment of the lotto winnings by Mr.
Anderson in year 2010?
a.
b.
c.
d.
Subject to 25% final withholding tax

Subject to 20% final withholding tax
Exempt from income tax
Subject to income tax as part of gross income
under Section 32(A) of the Tax Code
148.
A stock dividend received from a domestic
corporation by a non-resident alien not engaged in
trade or business in the Philippines is:
a.
b.
c.
d.
subject to 20% final tax

not subject to tax
149.
Which of the following statements about the
Regular Corporate Income Tax and the Minimum
Corporate Income Tax (MCIT) is correct?
a.
b.
c.
d.
The annual corporate income tax is always

equal or higher than the MCIT.
MCIT is always lower than the Regular Corporate
Income Tax at regular rate.
The excess of MCIT over the Regular Corporate
Income Tax is allowed to be carried forward to
the next four (4) successive years.
The excess of MCIT over the Regular Corporate
Income Tax of the current year always reduces
the Regular Corporate Income Tax.
150.
For income tax purposes, it is important to know
the sources of income (i.e., from within and without
the Philippines) because:
a.
b.
c.
d.
The Philippines imposes income tax only on

income from sources within.
Some individual taxpayers are citizens while
others are aliens.
Export sales are not subject to income tax.
Some individual taxpayers and corporate
taxpayers are taxed on their worldwide
income while others are taxable only upon
income from sources within the Philippines.
151.
Which of the following cash or property
dividends is subject to Philippine income tax?
a.
Received by a domestic corporation from

another domestic corporation

b.
c.
d.
Received by a resident foreign corporation from

a domestic corporation
Received by a domestic corporation from a
foreign corporation not doing business in
the Philippines
Received by a non-resident foreign corporation
from another non-resident foreign corporation
a.
b.
c.
d.
152.
All of the following are taxed at 25% of their
gross income in the Philippines, EXCEPT:
a.
b.
c.
d.
Non-resident individual not doing business in the

Philippines
A foreign corporation whose only income in
the Philippines is the gain from sale of
shares of stock in the stock exchange
Non-resident foreign cinematographic film
owner/lessor
A non-resident American whose only income
earned in the Philippines is the interest on peso
time deposit
153.
Under Philippine tax laws, the term marginal
income earner refers to those individuals whose
businesses do not realize gross sales or receipts
exceeding _____ in any 12-month period.
a.
b.
c.
d.
P 150,000
P 200,000
P 60,000
P 100,000
154.
Which of the following income items received by
a non-stock, non-profit organization operated
exclusively for the promotion of social welfare is
exempt from corporate income tax?
a.
b.
c.
d.
Assessment dues from members of the

organization
Income from grocery store operated by the
organization
Rentals from office spaces in the building owned
by the organization
Parking fees in the parking area inside the
building owned by the organization
155.
For its expansion plan for the year 2010, the
Central Visayas University (CVU), a proprietary
educational institution, obtained a loan from
Metropolitan Bank for the construction of a school
building, for which CVU is paying substantial
interests. As part of its financial policy, CVU deposits
in a bank account the tuition and other fees collected
from the students. For its income tax return in
taxable year 2010, CVU deducted in full the interest
expenses on its loan obtained from Metropolitan
Bank. The Bureau of Internal Revenue (BIR)
disallowed the deduction on the ground that the
same should be capitalized, or that the same should
be subject to reduction. CVU counters that it can
declare the interest expense as an outright business
expense, and that it is not mandated to adjust the
amount considering that it did not adopt a tax
arbitrage scheme. Which would be the best decision
based on the foregoing facts?

18
CVUs position is fully justified.

The BIRs position is fully justified.
The BIR is correct in arguing that CVU should
capitalize the interest expense, but CVU is
correct in arguing that there should be no
adjustment to the interest expense.
CVU is correct in arguing that the interest
expense may be declared as an outright
expense, but the BIR is correct in arguing
that there should be adjustments to the
interest expense despite the non-availment
by the taxpayer of the tax arbitrage
scheme.
156.
In computing gain or loss from the sale or other
disposition of property acquired by gift or donation,
the cost basis of the donee is:
a.
b.
c.
d.
Fair market value at the time of donation

Purchase price plus expenses of acquisition,
including VAT
Fair market value at the time of purchase
The basis as if the property is in the hands
of the donor
157.
Proctor and Gamble Philippines Manufacturing
Corporation (PMC), a corporation organized under
Philippine laws, is a subsidiary of Proctor and Gamble
USA. In year 2010, PMC needed at least
P50,000,000 as working capital. As of the end of
taxable year 2009, its liquid assets were only
P40,000,000. Thus, it retained an excess of 100% of
its paid-in capital in the amount of P10,000,000 to
increase its working capital for taxable year 2010.
The Commissioner of Internal Revenue (CIR) sent an
assessment letter to PMC demanding the payment of
deficiency income tax for year 2010 representing
10% of the improperly accumulated surplus.
Disputing the assessment, PMC asserted that the
retention of the corporate surplus of P10,000,000
was used to increase the working capital reserve,
and as such, it falls within the term reasonable
needs of the business. Resolve the issue.
a.
b.
c.
d.
The CIRs assessment is not valid because an

increase in capital reserve is designed to meet
the reasonable needs of the business.
The CIRs assessment is unmeritorious because
the accumulated earnings tax does not apply to
the subsidiary of a foreign corporation.
PMCs dispute bears no merit because PMC is not
one of those exempt from the imposition of
improperly accumulated earnings tax of 10%.
PMCs dispute has no merit because
increase in capital reserve is not covered
by the justifying instances for the retention
of corporate surplus under Revenue
Regulations No. 2-2001.
158.
All of the following fringe benefits are not
taxable except
a.
b.
De minimis benefits
Those authorized and exempted under
contractual agreements

c.
d.
Contributions of the employer for the benefit of

the employee to retirement, insurance, and
hospitalization
Benefits given to a clerk of the company
159.
ABC Corporation, a domestic corporation, paid
various taxes during the taxable year 2010. For
income tax computation purposes, which of the
following is NOT deductible from its gross income?
a.
b.
c.
d.
Documentary stamp tax

Value-added tax
Real estate tax
Fringe benefits tax
160.
Mrs. Corazon Cruz, a retired public school
teacher, relies on her pension from the Government
Service Insurance System (GSIS) and on the interest
income from her time deposit of P800,000.00 with
City Savings Bank. Is Mrs. Cruz liable to pay any tax
on her income?
a.
b.
c.
d.
She is exempt from tax on the pension from

GSIS but the interest she receives from her
time deposit is subject to 20% final
withholding tax.
GSIS but the interest she receives from her time
deposit is subject to 10% final withholding tax.
As a senior citizen, she is exempt from tax on
both the pension from GSIS and on the interest
she receives from her time deposit.
GSIS but the interest income she receives from
her time deposit shall be included as part of her
gross income.
ESTATE TAX
161.
Which of the following deductions from the gross
estate is NOT subject to a maximum amount?
a.
b.
c.
d.
Medical expenses
Funeral expenses
Family home
Vanishing deduction
162.
A decedent who is not a citizen nor a resident of
the Philippines shall be subject to the Philippine
estate tax if:
a.
b.
c.
d.
163.
The decedent was a former Filipino citizen who

acquired his new citizenship within six (6)
months prior to his death.
The decedent died in the Philippines.
The decedent stayed in the Philippines prior to
his death for a period of more than 180 days
within the year whether continuous or
interrupted.
The decedent owns shares of stock of
Philippine corporations at the time of his
death.
Which of the following statements is correct?

19
a.
b.
c.
d.
Proceeds of accident insurance paid by the

insurance company directly to a revocable
beneficiary are part of the gross estate of the
decedent.
Proceeds of life insurance taken out by the
decedent on his own life when already married,
is conjugal property in the gross estate,
regardless of whether the premiums were paid
out of exclusive or conjugal property.
Proceeds of property insurance receivable
when the decedent was still alive are part
of the gross estate.
Proceeds of group insurance secured by the
employer, when the revocable beneficiary is the
wife, are part of the gross estate.
164.
The following are transactions and acquisitions
exempt from transfer tax EXCEPT:
a.
b.
c.
d.
Transmission from the first heir or donee in favor

of another beneficiary in accordance with the
desire of the predecessor
Transmission or delivery of the inheritance or
legacy by the fiduciary heir or legatee to the
fideicommissary
The merger of usufruct in the owner of the
naked title
All
bequests,
devisees,
legacies
or
transfers to social welfare, cultural or
charitable institutions
165.
Which of the following statements below
regarding estate tax is correct?
a.
b.
c.
d.
Revocable transfers shall be included in the

gross estate only if the revocation was actually
exercised.
A transfer mortis causa of a real property
located in the Philippines and held as capital
asset is not subject to estate tax.
Proceeds of life insurance policy where the
beneficiary is the executor are included in
the gross estate in all cases.
In the computation of estate tax, only a married
decedent can claim the deduction for Family
Home.
166.
The personal properties of a non-resident, not
citizen of the Philippines would not be included in the
gross estate if:
a.
b.
c.
d.
The intangible personal property is in the

Philippines
The intangible personal property is in the
Philippines and the reciprocity clause of the
estate tax law applies
The tangible personal property is in the
Philippines
The personal property is shares of stock of a
domestic corporation 90% of whose business is
in the Philippines
167.
Which of the following should NOT be included in
the gross estate of a decedent for purposes of
computing the estate tax?


d.
a.
b.
c.
d.
Revocable transfer where the consideration is

not sufficient
Revocable transfer where the power of
revocation was not exercised
Proceeds of life insurance where the beneficiary
designated is the estate and the designation is
irrevocable
Proceeds of life insurance where the
beneficiary designated is the mother and
the designation is irrevocable
168.
The effect of the declaration of a corporation of
a stock dividend during the pendency of the
settlement of the estate of a deceased stockholder
will be:
a.
b.
c.
d.
The inclusion of the stock dividends declared in

the estate of the decedent
The exclusion of the stock dividends
declared from the estate of the decedent
The naming of the stock dividend directly in
favor of the heirs of the decedent
The inclusion of the stock dividends in the
income of the estate of the decedent
169.
Which will NOT form part of the estate of a
deceased alien who was residing in the Philippines at
the time of his death?
a.
b.
c.
d.
A parcel of land located abroad

His shares of stocks of a foreign corporation
His ring which was worn by him when he was
buried
Life insurance proceeds from a foreign
insurer where his wife was designated as
irrevocable beneficiary
170.
The following acquisitions and transmissions
shall NOT be taxed, EXCEPT:
a.
b.
c.
d.
The merger of usufruct in the owner of the

naked title
The transmission or delivery of the inheritance
or legacy by the fiduciary heir or legatee to the
fideicommissary
The transmission from the first heir, legatee or
donee in favor of another beneficiary, in
accordance with the desire of the predecessor
The transmission of the property for use to
the national government provided that said
property was included in the gross estate
of the decedent
171.
Which of the following exempt transmissions will
still require inclusion of the property in the gross
estate?
a.
b.
c.
Merger of the usufruct in the owner of the naked

title
Legacy to a charitable institution whose
administrative expenses did not exceed
30% of the legacy
Transfer from a first heir to a second heir
designated by the decedent

20
Death benefits received under the GSIS and SSS
172.
Which of the following statements on judicial
expenses, as deductions form the gross estate is
NOT correct?
a.
b.
c.
d.
shall be allowed if the estate is under judicial

settlement
shall be allowed even if the estate is extrajudicially settled
shall include judicial expenses to settle the
conflicting claims of the heirs
shall be allowed even if the decedent is a nonresident alien and represent expenses outside
the Philippines
173.
All of the following statements are correct
EXCEPT one. Which one is the exception?
a.
b.
c.
d.
The allowable deduction for funeral expenses

can never be more than the actual funeral
expenses paid.
Vanishing deduction diminishes the estate
physically.
In order to be deductible from gross estate,
taxes must accrue before the decedents death.
Claims against the estate, even for equitable
reasons, are not allowed as deduction if not
notarized.
174.
Mr. Estrada, a citizen of the Philippines and
resident of Cebu City, died testate on June 10, 2010.
Among his gross estate are properties inherited from
his deceased father who died on April 14, 2007.
What percentage of deduction will be used in
computing the amount of vanishing deduction?
a.
b.
c.
d.
80% of the value taken as basis for vanishing

deduction
deduction
deduction
40% of the value taken as basis for
vanishing deduction
175.
The Estate Tax Return shall be accompanied by
a certificate of an independent Certified Public
Accountant (CPA) if the amount of the gross estate
is:
a.
b.
c.
d.
P2,000,000 or over
Over P1,500,000
P1,500,000 or over
Over P2,000,000
176.
For purposes of computing estate tax, the
following requirements shall be complied with in
order to make medical expenses deductible from the
gross estate of a resident alien decedent, EXCEPT:
a.
b.
Medical expenses must be incurred within

six (6) months prior to his death.
Medical expenses must not exceed P500,000.

c.
d.
Medical expenses must be duly substantiated by

receipts.
Medical expenses must be incurred by the
decedent.
177.
Summit Corporation took an insurance on the
life of its President, Mr. Vincent Perez, designating
his wife Ms. Grace Perez as revocable beneficiary. In
the event of death of Mr. Perez, will the insurance
proceeds for part of the gross estate of Mr. Perez?
a.
b.
c.
d.
Yes, because the said insurance was secured on

Mr. Perezs life by his employer.
No, because it was not Mr. Perez who
secured said insurance for his life, and the
same was not payable to his estate or to
his executor or administrator, but to Ms.
Grace Perez.
Yes, because the said insurance was secured on
Mr. Perezs life by his employer, making Mr.
Perezs wife the revocable beneficiary.
No, because the said insurance was secured by
Mr. Perezs employer, making the latter entitled
to the insurance proceeds.
DONORS TAX
178.
In computing the donors tax on a subsequent
donation, the donor must also consider:
a.
b.
c.
d.
All prior net gifts during his lifetime

Only the present donation
All prior net gifts during the calendar year
The present and the immediately preceding
donations
179.
If the donor is a non-resident and not a citizen
of the Philippines, which of the following statements
is NOT correct?
a.
b.
c.
d.
Property situated abroad but donated to a

citizen of the Philippines is not subject to the
donors tax.
Property situated in the Philippines but donated
to a donee abroad is subject to the donors tax.
Property located outside the Philippines but
donated on account of marriage to a
resident of the Philippines is allowed a
deduction of P10,000.
Property located in the Philippines with a fair
market value of P150,000 and donated to a
citizen of the Philippines is subject to the donors
tax.
180.
Which of the following statements is NOT correct
in a case where a donor with several donations
during the year fails to file the Donors Tax Return for
each of the dates when the donations were made?
a.
Such failure shall be cured by filing a

Donors Tax Return at the end of the year
reflecting all donations made within the
year and paying the taxes shown in that
one return.

21
b.
c.
d.
Each failure is subject to penalties for non-filing

of tax return and non-payment of the tax due on
time.
The taxpayer can voluntarily file late the Donors
Tax Return for each date that donations were
made, and make payments on the tax due
shown on each tax return, with penalties.
If the different donors taxes were not paid on
the original due dates because of requests for
extension seasonably filed with the
Commissioner of Internal Revenue, each
required payment of tax shall have an extended
period of not more than six months.
181.
Which of the following statements about Donors
Tax is NOT correct?
a.
b.
c.
d.
182.
a.
b.
c.
d.
It is computed on the basis of the net gifts of a

calendar year.
It becomes proportionately higher on later
donations.
It is computed and paid within 30 days from the
date of donation.
It is computed separately for each spouse in
case of a joint donation.
In the preparation of the Donors Tax Return
Dowries are not shown anymore as gross
gifts and as deductions.
Donors tax on donations to strangers and to
non-strangers are computed and shown in
separate tax returns.
Dowries are shown as deductions from the gross
gifts.
Spouses making donations of conjugal or
community property prepare only one Donors
Tax Return.
183.
An irrevocable trust was created whereby Mr.
Samuel San Jose transferred his commercial
apartment to the Philippine Trust Company as
trustee. The trust instrument designated Mrs. Josefa
San Jose as the beneficiary to the rentals for life and
appointed their only son to the remainer. Which of
the following statements best describes the taxability
of the trust?
a.
b.
c.
d.
The transfer by Mr. San Jose is subject to

donors tax while the rentals accruing to Mrs.
San Jose is exempt from income tax as property
acquired by gift.
The transfer by Mr. San Jose is subject to
donors tax while the rentals accruing to Mrs.
San Jose is subject to income tax.
The transfer by Mr. San Jose is not subject to
donors tax but the rentals accruing to Mrs. San
Jose is subject to donors tax being the nature of
usufruct.
The transfer of the apartment to the trustee is
subject to estate tax upon the death of Mr. San
Jose.
184.
The following statements are presented to you
for evaluation:

Statement No. 1
Donations to a stranger are based on gross gift.
188.
Statement No. 2
Only gratuitous transfers are subject to donors tax.
a.
b.
c.
d.
Statement No. 3
All donations are subject to donors tax.
a.
b.
c.
d.
Only Statement No. 1 and Statement No. 3 are

FALSE.
Only Statement No. 1 and Statement No. 2 are
TRUE.
Only Statement No. 1 is FALSE.
All statements are FALSE.
Cebu City
Mandaue City
Quezon City
Either Cebu City or Quezon City, at the option of
the donor
186.
A taxpayer died leaving real and personal
properties. Among the personal properties he left
was a taxicab. Within six (6) months after his death,
while the estate was still under administration, the
taxicab was carnapped and was not recovered.
Which of the following statements below is correct
regarding the tax treatment of the loss of the
taxicab?
a.
b.
c.
d.
The loss is deductible from the gross estate only.

The loss is deductible from the gross income
only.
The loss is deductible from both the gross estate
and the gross income.
The loss is deductible from the gross estate
if not claimed as a deduction from the
gross income.
187.
The provisions of the Family Code of the
Philippines require the transfer of the share of the
guilty spouse of his/her share in the community
property in favor of the innocent spouse, in effect
causing a transfer of the property. For taxation
purposes, the said transfer is:
a.
b.
c.
d.
Subject to Philippine donors tax due to

donative intent
Not subject to the Philippine donors
tax due to lack of donative intent
Not subject to the Philippine donors tax due
to a provision of the Family Code
Subject to Philippine donors tax because
there was a transfer of property for
inadequate consideration

22
Donations to relatives
Donations to gratuitous transfers only
All donations
Donations to government
189.
Which of the following statements regarding
Donors Tax Return is correct?
a.
b.
185.
Mr. Villamor maintains legal residence in Quezon
City. He transacted business in Makati City, and
temporarily resided in Cebu City for a month. During
his stay in Cebu City, he made a donation to his
nephew who graduated Magna Cum Laude from one
of the reputable universities in Cebu City. The
donation was accepted through a notarized
document executed in Mandaue City. In which BIR
office should the Donors Tax Return be filed?
a.
b.
c.
d.
Donors tax accrues on:
c.
d.
In the case of husband and wife making

donations, one Donors Tax Return shall be
filed and signed by either the husband or
the wife.
The Donors Tax Return must be
accompanied by a certificate of an
independent Certified Public Accountant if
the gross gift is P50,000 or more.
If the donor has no legal residence in
the Philippines, the Donors Tax Return
shall be filed directly with the Office of
the Commissioner of Internal Revenue.
The Donors Tax Return must be filed within
30 days after the end of the calendar year.
190.
For the purpose of computing donors tax, the
following items shall be considered as situated in the
Philippines, EXCEPT one. Which one is the
exception?
a.
b.
c.
d.
Shares in any foreign corporation 85% of

the indebtedness of which is located in the
Philippines
Franchise which must be exercised in the
Philippines.
Shares issued by any foreign corporation which
have acquired a business situs in the Philippines.
Shares or rights in any partnership established
in the Philippines
VALUE-ADDED TAX
191.
a.
b.
c.
d.
The Cross Border Doctrine refers to:

Withholding of income taxes on franchise
payments to non-residents.
VAT zero-rating of sales
Taxes on transfers of personal property from one
jurisdiction to another
Exemption of foreign governments from taxation
192.
Under the value-added tax (VAT) system, export
sales of goods are subject to 0% VAT because the
consumption will be made outside the Philippines,
while importations of goods are subject to 12% VAT
because they are for consumption within the
Philippines.
This is in accordance with what
principle?
a.
b.
c.
d.
Principle of Recoupment
Immediacy Principle
Destination Principle
Territorial Jurisdiction Principle

193.
Bambi Corporation is a VAT-registered enterprise
engaged in the manufacture of cooking oil. It
purchases coconut and supplies used in the
manufacture of cooking oil. As a result of its
purchases, Bambi Corporation:
a.
b.
c.
d.
Can claim presumptive input VAT on its

purchases of coconut in lieu of the actual VAT
paid
Can claim both presumptive input VAT on
its purchases of coconut and input VAT on
its purchases of supplies
Cannot claim any input VAT
Can claim input VAT on its purchases of supplies
only
194.
If an importer of goods is tax-exempt, the
value-added tax (VAT) imposed on such importation:
a.
b.
c.
d.
Should be paid by the tax-exempt importer, if he

subsequently sells the goods to a non-taxexempt purchaser
Should be paid by the non-tax-exempt
purchaser to whom the tax-exempt
importer sells the goods
Is a liability either of the tax-exempt importer or
the non-tax-exempt purchaser
Is not due even if the imported goods are
subsequently sold to a non-tax-exempt
purchaser because the transaction was exempt
at the point of importation
195.
Under Section 109 of the National Internal
Revenue Code (NIRC) of 1997, as amended by
Republic Act No. 9337, any sale or lease of goods or
properties or the performance of services other than
those transactions specifically mentioned under the
said laws, the gross annual sales and/or receipts of
which do not exceed the amount of P1,500,000, shall
be exempt from the value-added tax (VAT).
However, on October 27, 2011, the Bureau of
Internal Revenue (BIR) issued Revenue Regulations
No. 16-2011 which increased the threshold amount
from P1,500,000 to ________.
a.
b.
c.
d.
196.
P1,919,500
P2,000,000
P2,250,000
P2,500,000
liquidation of advances, and should not be

considered as gross receipts of the professional
subject to VAT.
a.
b.
c.
d.
197.
Pursuant to Republic Act No. 9337, the
Philippine Amusement and Gaming Corporation
(PAGCOR) is
a.
b.
c.
d.
198.
a.
b.
c.
d.
A general professional partnership (GPP) is subject to

VAT, but the partners are not subject to VAT on their
respective shares in the net distributable income of
the partnership.
Statement No. 2
Amounts received by professionals from clients as
reimbursement of out-of-pocket expenses are

23
Subject to both Income Tax and Value-Added

Tax (VAT)
Exempt from Income Tax but subject to ValueAdded Tax (VAT)
Exempt from both Income Tax and Value-Added
Tax (VAT)
Subject to Income Tax but exempt from
Value-Added Tax (VAT)
The value-added tax (VAT) on goods sold
Is not imposed on goods exported
May be due even if the goods were not
actually sold
Is based on gross sales and not on net sales
Is a selling expense of the trader
199.
Mr. Borromeo is a lessor of both real and
personal properties. Is he subject to any business
tax on the said lease of properties?
a.
b.
c.
d.
Lease of
Lease of
Real Property
Personal Property
Subject to VAT
Subject to VAT
Subject to VAT
Not subject to VAT
Not subject to VAT
Subject to VAT
Not subject to VAT
Not subject to VAT
200.
For value-added tax (VAT) on sale of services,
the output VAT is computed:
a.
b.
c.
d.
Statement No. 1

Both statements are not correct.
On billings of the month

On collections of the month on all billings
made
On the contract price of contracts completed
during the taxable period
Only and strictly on labor performed under the
contract for services
201.
Transactions considered in the course of trade
or business and, therefore, subject to the valueadded tax (VAT) include all of the following, EXCEPT:
a.
b.
c.
Regular conduct or pursuit of a commercial or an

economic activity by a non-stock, non-profit
private organization
Isolated services in the Philippines by nonresident foreign persons
Regular conduct or pursuit of a commercial or an
economic activity by a stock private organization

d.
Isolated sale of goods or services for a

gross selling price or receipts of
P1,000,000
202.
A foreign corporation whose activities are
subject to value-added tax (VAT) in the Philippines
will be collected the VAT in the following manner:
a.
b.
c.
d.
The domestic payor shall be required to file and

pay the VAT at 12% of the selling price and
remit the same to the Bureau of Internal
Revenue (BIR) in the name of the domestic
payor.
The foreign corporation shall be required to file
and pay the VAT upon receipt of payment from
the Philippine source on the due date prescribed
by the National Internal Revenue Code (NIRC).
The domestic payor shall be required to
withhold the VAT at 12% of the selling
price and remit the same to the BIR in
favor of the foreign corporation.
The foreign corporation shall be required to file
and pay the VAT upon receipt of the payment
from the Philippine source through the Philippine
consular or embassy services.
203.
Which of the following is NOT subject to the
value-added tax (VAT)?
a.
b.
c.
d.
Transfer, use or consumption not in the ordinary

course of business of goods or properties
ordinarily intended for sale or use in the course
of business
Consignment sales
Distribution or transfer to creditors in payment
of debt
Distribution or transfer to shareholders or
investors of share in the profits of a VATregistered person
204.
The phrase deemed sale for VAT purposes
includes inventories of taxable goods existing at the
time of:
a.
b.
c.
d.
Change of control of a corporation through the

acquisition of the controlling interest
Change in the trade name or corporate name of
the business
Merger or consolidation
Dissolution of a partnership and the
creation of a new partnership which takes
over the business
d.
206.
Which of the following statements regarding
value-added tax (VAT) is NOT correct?
a.
b.
c.
d.
a.
b.
c.
Domestic common carriers by sea relative to

their transport of passengers from one place in
the Philippines to another place in the
Philippines are subject to 12% VAT.
Domestic common carriers which transport
passengers, goods, and cargoes by land are
not subject to the 12% VAT, but subject to
the 3% common carriers tax.
Domestic common carriers by air relative to
their transport of cargoes from one place in the

24
A VAT-registered taxpayer can pass on the VAT

even to non-VAT registered buyers.
Non-stock, non-profit private organizations
are not subject to VAT if their income from
sales is used for non-profit purposes.
In the case of importation of taxable goods, the
importer, whether an individual or corporation
and whether or not made in the course of his
trade or business, shall be liable to VAT.
Any business or businesses pursued by an
individual where the aggregate gross sales or
receipts do not exceed P100,000 during any 12month period shall be considered principally for
subsistence or livelihood and not in the course of
trade or business.
207.
Under existing tax laws, the transitional input
value-added tax (VAT) which may be creditable
against the output VAT of certain VAT-registered
taxpayers shall be:
a.
b.
c.
d.
2% of the value of the beginning inventory on

hand or actual VAT paid on such goods,
materials and supplies, whichever is lower
materials and supplies, whichever is higher
2% of the value of the beginning inventory
on hand or actual VAT paid on such goods,
materials and supplies, whichever is higher
materials and supplies, whichever is lower
208.
All of the following transactions, EXCEPT one,
are exempt from value-added tax (VAT). Which one
is the exception?
a.
b.
205.
All of the following statements, EXCEPT one, are
correct. Which one is the exception?
Philippines to another place in the Philippines

are subject to 12% VAT.
Domestic common carriers by air relative to
their transport of passengers from the
Philippines to any foreign port are subject to 0%
VAT.
c.
d.
Lease of residential units with a monthly rental

per unit of P20,000, but the amount of
aggregate rentals received by the lessor during
the year does not exceed P1,500,000
Sale of real properties utilized for socialized
housing as defined under the Urban
Development and Housing Act of 1992
Lease of residential units with a monthly rental
per unit of P10,000, but the amount of
aggregate rentals received by the lessor during
the year exceeds P1,500,000
Sale of residential lot valued at P2,500,000
209.
A zero-rated sale of goods or services is a
taxable transaction for value-added tax (VAT)
purposes, but shall not result in any output tax.
Which of the following transactions is NOT
considered a zero-rated sale?

a.
b.
c.
d.
Sale of cargo vessels for international

transport operations
Sale of gold to the Bangko Sentral ng Pilipinas
(BSP)
Sale of fuel generated through renewable
sources of energy
Sale of goods to the Asian Development Bank
(ADB)
210.
Sweet Sugar Corporation is engaged in the
manufacture of refined sugar. It ordered P5,000,000
worth of raw materials from a certain sugarcane
plantation in Bacolod City. Can Sweet Sugar
Corporation recover input VAT from the said
transaction?
a.
b.
c.
d.
No, because the sale of agricultural food

products in their original state is exempt from
VAT.
No, because no VAT was passed on by the
sugarcane
plantation
to
Sweet
Sugar
Corporation.
Yes, because Sweet Sugar Corporation is
allowed to claim presumptive input VAT
from the transaction.
Yes, because Sweet Sugar Corporation was
burdened with VAT when it purchased the raw
materials.
211.
Mr. Bautista, a hobbyist of motorcycle
paraphernalia, received an order for a good number
of his products which he manufactures himself that
would be exported to the United States. Mr. Bautista
did not know that such order would amount to
almost P10,000,000. The said order was completed
and shipped to the United States. The effect on Mr.
Bautista on VAT would be:
a.
b.
c.
d.
His sale would be subject to 12% VAT because

he did not register as a VAT taxpayer.
His sale would be subject to 0% VAT
because it was an export sale, but he would
be classified as a VAT-exempt taxpayer.
His sale would be subject to 0% VAT because it
was classified as an export sale, and he would
be liable to pay VAT as a normal VAT-registered
taxpayer.
His sale would be subject to 0% VAT because
the payment was inwardly remitted through the
Philippine banking system and he would be liable
to pay VAT as a normal VAT-registered taxpayer.
212.
Payments made by government to businesses
shall be subject to value-added tax (VAT) in the
following manner:
a.
b.
c.
d.
Government will withhold the 12% VAT from

their payments to the supplier.
Government will pay the additional 12% VAT to
the price provided by the supplier.
Government will withhold an amount of 5% on
the VAT component of the selling price.
Government will withhold an amount of 5%
on the gross selling price.

25
213.
subject to value-added tax (VAT)?
a.
b.
c.
d.
Sale of services in the course of business

Earnings from services rendered to
employer
Sale of goods in the course of business
Importation of goods which is not intended for
sale
214.
Which of the following transactions below is NOT
subject to the value-added tax (VAT)?
a.
b.
c.
d.
Services rendered to persons engaged in

international air transport operations
Services rendered by domestic common carriers
by land for the transport of goods
Transport of passengers by domestic sea carriers
from the Philippines to a foreign country
Services rendered by international shipping
carriers doing business in the Philippines
215.
Can
the
following
taxpayers
elect
tax
refund/credit for their excess input value-added tax
(VAT)?
Subject to 12% VAT
Subject to 0% VAT
Exempt from VAT
(continuously doing business)
a. Yes
b. Yes
c. Yes
d. No
Yes
Yes
No
Yes
Yes
No
No
No
216.
BRP Development Corporation, a real-estate
developer organized in the 1970s, bought several
parcels of land in Tuba, Benguet during the mid-70s.
It has never registered as VAT-liable since its sales
during the past years did not meet the mandatory
liability for VAT. However, during the current year,
due to increased transactions, it became liable for
the first time for VAT. BRP Development Corporation
invoked entitlement to transitional input taxes on all
its landholdings, but the same was disallowed
because according to the Bureau of Internal Revenue
(BIR), the purchase of these lands happened at a
time when no VAT was actually paid on such lands.
Was the action of the BIR proper? Decide.
a.
b.
c.
d.
BRP is entitled to transitional input VAT

regardless of its prior non-VAT registration.
BRP is not entitled to transitional input VAT as it
never registered itself in the past as VAT-liable.
BRP is not entitled to transitional input VAT
because when the purchase was made, the VAT
law was not yet in force.
BRP is entitled to transitional input VAT only if it
can claim that it shouldered the burden of the
VAT during the prior years.
217.
exempt from value-added tax (VAT)?

a.
b.
c.
d.
Sale of equipment and fuel to persons

engaged in international shipping transport
operations.
Sale or importation of fertilizers.
Services rendered by individuals pursuant to an
employer-employee relationship.
Sale or lease of passenger or cargo vessels and
aircraft for international operations.
TAX REMEDIES
218.
In which of the following situations is
examination of bank deposits by the Bureau of
Internal Revenue (BIR) disallowed?
a.
b.
c.
d.
When the taxpayer is suspected of tax

evasion
When a foreign tax agency requests for
examination pursuant to the Exchange of
Information on Tax Matters Act
When the taxpayer requests for a compromise
based on financial inability to pay the tax, and
all the requisites to give due course for a
compromise had been complied with
When the examination covers an estate tax
liability of a deceased taxpayer, even if the
account is under a joint account
219.
Which of the following violations cannot be
subject to compromise penalties?
a.
b.
c.
d.
Failure to keep/preserve books of accounts and

accounting records
Failure to keep books of accounts or records in a
native language or English
Failure to have books of accounts audited and
have financial statements attached to income
tax return certified by independent CPA
Keeping of two sets of books of accounts or
records
220.
Under the National Internal Revenue Code of
1997, the Commissioner of Internal Revenue has no
power or authority
a.
b.
c.
d.
To terminate taxable year and make assessment

To inquire into the taxpayers bank
deposits if there is a reasonable ground to
investigate due to tax evasion
To obtain information, examine, summon, and
take testimony
To prescribe fair market value of real properties
221.
The Commissioner of Internal Revenue may
_______ the payment of internal revenue tax when
it appears to be unjustly or excessively assessed.
a.
b.
c.
d.
compromise
abate
credit
refund
222.
Mr. X filed his income tax return (ITR) for the
calendar year 2008 on April 15, 2009. He received a
Final Assessment Notice (FAN) from the Bureau of

26
Internal Revenue (BIR) on June 29, 2011.

day to file a protest on the FAN is on:
a.
b.
c.
d.
His last
July 29, 2011

April 15, 2012
July 28, 2011
July 14, 2011
223.
Mr. Angeles filed his income tax return (ITR) for
the calendar year 2009 on April 12, 2010.
He
received a Final Assessment Notice (FAN) from the
Bureau of Internal Revenue (BIR) on March 21,
2011. He filed a protest letter with the BIR on April
15, 2011. If the protest was denied by the BIR
Commissioner, and Mr. Angeles received the said
decision on August 1, 2011, his remedy is:
a.
b.
c.
d.
Appeal to the Court of Tax Appeals

before August 31, 2011
Appeal to the Court of Appeals on or
August 16, 2011
Appeal to the Secretary of Finance on or
August 16, 2011
Appeal to the Court of Tax Appeals on or
August 16, 2011
on or
before
before
before
224.
An audit by the Bureau of Internal Revenue
(BIR) of a taxpayers accounting records shows that
it withheld P1,500,000 from its suppliers but
remitted to the BIR only the amount of P250,000.
The BIR should subject the taxpayer to a:
a.
b.
c.
d.
written notice calling it to an informal conference

formal assessment notice and a letter of
demand for the payment of the deficiency
tax
preliminary assessment notice
warrant of levy and distraint
225.
Which of the following will NOT suspend the
period for collection of any tax by summary or
judicial proceedings?
a.
b.
c.
d.
If the taxpayer requests for reinvestigation

which is granted by the Bureau of Internal
Revenue (BIR)
If the taxpayer cannot be located in the address
given by him in the tax return filed
If the taxpayer is found bankrupt by a
competent court
If the warrant of distraint and levy is duly served
upon
the
taxpayer,
his
authorized
representative, or a member of his household
with sufficient discretion, and no property could
be located
226.
Assessment is necessary in all of the following
cases, EXCEPT:
a.
b.
c.
d.
Before the preliminary investigation of a

fraudulent tax evasion case could prosper
To fix the tax liability of a taxpayer
To establish a case for judicial action
For issuance of a warrant of distraint or levy

227.
Which of the following cannot be delegated by
the Commissioner of Internal Revenue?
a.
b.
c.
d.
Signing of the Letter of Authority (LOA)

Granting of request for reinvestigation
Assignment of internal revenue officers to
establishments where the articles subject
to excise tax are produced
Signing of the Warrant of Levy
228.
The Bureau of Internal Revenue (BIR) is
conducting an audit investigation of Diamond Star
Corporation (Corporation). A subpoena was issued
to the Corporation to produce its books of accounts,
but the Corporation did not comply. To the surprise
of the Corporation, its books of accounts ended up in
the hands of the BIR examiner. It turned out that an
employee of the Corporation, without any prior
clearance from the Corporation, submitted to the BIR
the said books. The Corporation complained that its
books should not be used in establishing its tax
liability. Decide.
a.
b.
c.
d.
The books may be used in establishing

liability as it is within the power of the BIR
to require the submission of documents
necessary for the audit investigation.
The books may be used in establishing liability.
Even if the document was unlawfully obtained,
the same does not bar the BIR from using the
said books as taxes are the lifeblood of the
government.
The books may not be used as it was
unreasonably obtained by the BIR.
The books may not be used as it was not the
Corporation that gave the documents to the BIR.
229.
Under the National Internal Revenue Code, no
credit or refund of taxes shall be allowed unless the
taxpayer:
a.
b.
c.
d.
Files a written claim for credit or refund

with the BIR within 2 years from payment
of the tax
Pays the tax under protest
Appeals to the Court of Tax Appeals
Amends his tax return
230.
An under-declaration of sales by a taxpayer to
the extent of 30% or the over-declaration of
expenses to the extent of 30% shall be
a.
b.
c.
232.
This principle states that where a claim for tax
refund or credit is filed beyond the prescriptive
period, it can still be applied against other taxes that
may be due:
a.
b.
c.
d.
233.
For filing a false and fraudulent return, a
surcharge is imposed. Which of the following is
correct?
a.
b.
c.
d.
a.
b.
c.
d.
a.
b.
c.
d.
c.

27
Where the taxpayer requests for and is granted

a reinvestigation by the Commissioner of
Internal Revenue
If the taxpayer is out of the country
If the taxpayer changes his address
informing the Commissioner of Internal
Revenue of such change
When the Commissioner of Internal Revenue is
prevented from making an assessment and
within 60 days thereafter
236.
Which of the following statements is NOT
correct?
231.
It is the failure to pay the correct amount of
tax::
Delinquency
Deficiency
Default
Delay
3 years after the correct tax return is filed

10 years after the correct tax return is filed
3 years after discovery of failure to file return
10 years from the prescribed date of filing of the
return
235.
The prescriptive period for the issuance of a
formal notice of assessment may not ordinarily be
stayed because of the life blood theory. However,
there are certain instances where the running of the
prescriptive period may be suspended. Which
among the following is NOT among the recognized
exceptions which suspend the prescriptive period
within which to assess?
a.
a.
b.
c.
d.
50% as administrative penalty

50% as criminal penalty
25% plus 50% as administrative penalty
25% as criminal penalty
234.
The
correct
prescriptive
period
on
tax
assessment under the National Internal Revenue
Code (NIRC) is within:
Subject to 50% surcharge

Immediately due for collection
Prima facie presumption of fraud on the part of
the taxpayer
Subject to income tax assessment
d.
Claim of right doctrine

Doctrine of proprietary interest
Doctrine of equitable recoupment
Equitable tax benefit rule
b.
d.
If a taxpayer is acquitted in a criminal violation

of the Tax Code, this acquittal does not
exonerate him from his civil liability to pay the
taxes.
A conviction for tax evasion is not a bar for
collection of unpaid taxes.
A tax assessment is necessary to a criminal
prosecution for willful attempt to defeat
and evade payment of taxes.
Criminal proceedings under the Tax Code are
now a mode of collection of internal revenue
taxes, fees or charges.

237.
The following are administrative remedies
available to a taxpayer in connection with collection
of taxes, EXCEPT one. Which one is the exception?
a.
b.
c.
d.
Filing of claim for tax refund or credit

Filing a petition for reconsideration or
reinvestigation
Filing of criminal complaint against erring
BIR officials or employees
Entering into a compromise
238.
The Bureau of Internal Revenue (BIR) may
abate or cancel a tax liability when
First ground: A reasonable doubt as to the validity of
the claim against the taxpayer exists.
Second ground: Collection costs involved do not
justify the collection of the tax.
a. Both grounds are correct.
b. Both grounds are incorrect.
c. Only the first ground is correct.
d. Only the second ground is correct.
239.
In which of the instances below would the period
of limitation of assessment and collection of taxes be
suspended?
a.
b.
c.
d.
Where the tax return, on its face, presents a

clear error in the computation of the tax due
Where the taxpayer and the BIR agree on the
extension of the period of prescription after the
period to assess the tax has already expired
Where the taxpayer has changed business
address
and
has
not informed the
Commissioner of Internal Revenue
When the cases involve false or fraudulent
returns with intent to evade the tax or of failure
to file a return with the fact of the fraud duly
taken cognizance of in court
240.
Which of the following cases falls within the
jurisdiction of the Court of Tax Appeals (CTA)?
a.
b.
c.
d.
Criminal action for violation of the National

Internal Revenue Code
Question of whether or not to impose a
deficiency tax assessment upon a taxpayer
Appeal from undisputed tax assessment;
Action for refund of real property tax.
241.
An assessment was issued by the Bureau of
Internal Revenue (BIR) against the taxpayer based
on a review of the financial statements presented by
the taxpayer together with the tax returns, without
conducting an actual investigation, but it presented
the facts and laws of the findings of the BIR. The
same was questioned by the taxpayer on the ground
that it was capricious, whimsical and without legal
basis. The findings of the BIR, as presented, would
stand against the taxpayer because:
a.
b.
There is a presumption of regularity on the work

of the BIR examiner.
The BIR stated the facts and laws which were
the basis of the assessment made.

28
c.
d.
There is a presumption of correctness on

the findings of the BIR, which shifts the
burden to the taxpayer to disprove.
The taxpayer is prohibited from questioning the
wisdom of Congress in creating such a law which
allows the executive branch of the government
to generate revenues from whatever sources.
242.
Before paying an internal revenue tax, Tweeter
Corporation asked the Bureau of Internal Revenue
(BIR) for a ruling on its liability so that it could
properly be guided in the payment of the tax. In
reply, the BIR issued a ruling and, on the basis
thereof, Tweeter Corporation paid the tax.
Subsequently, the BIR motu propio reversed its
ruling, and made the reversal retroactive, which
would subject Tweeter Corporation to a deficiency
tax plus interest. Tweeter Corporation immediately
asked for a reconsideration which was denied.
Within 30 days from the receipt of the denial of its
motion for reconsideration, Tweeter Corporation filed
a petition for review with the Court of Tax Appeals
(CTA). Was the action taken by Tweeter Corporation
proper?
a.
b.
c.
d.
No. The CTA has no jurisdiction over appeals

from interpretations by the BIR of an internal
revenue tax law.
No. The CTA has no jurisdiction yet. Tweeter
Corporation should have waited for the
assessment, protests the same, and then
appeals to the CTA if the protest is denied.
Yes. The CTA has jurisdiction. The case
involves a decision of the BIR over other
matters in connection with the National
Internal Revenue Code.
Yes. The CTA has jurisdiction. The appellate
recourse from an adverse interpretation of a tax
law is to appeal to the CTA.
243.
What is the minimum compromise rate in cases
of doubtful validity of the assessment?
a.
b.
c.
d.
40% of the basic assessed tax

10% of the basic assessed tax
No limitation
P1,000,000
244.
Mr. Francisco, a Filipino citizen, is a stockholder
of Sonic Corporation, a domestic corporation
engaged in the trading of house appliances. Sonic
Corporation was incorporated in year 2000. Last
June 20, 2011, Sonic Corporation received a Final
Assessment Notice (FAN) mailed by the Bureau of
Internal Revenue (BIR) last June 9, 2011. The
assessment pertains to Sonic Corporations failure to
withhold 10% tax on cash dividends declared on May
20, 2008 and received by Mr. Francisco on July 20,
2008. Based on the foregoing facts, which of the
following statements is correct?
a.
b.
c.
Withholding tax should be 20%, hence, the

assessment is erroneous.
Assessment has already prescribed.
Assessment has not yet prescribed.

d.
Mr. Francisco should pay 10% withholding tax

because his dividend income is taxable.
245.
The distinction between actual distraint and
constructive distraint is that:
a.
b.
c.
d.
Actual distraint may be made on the property of

any taxpayer whether delinquent or not while
constructive distraint is made on the property
only of a delinquent taxpayer.
In actual distraint, there is a taking of
possession, while in constructive distraint,
the taxpayer is merely prohibited from
disposing of the property.
Actual distraint is effected by requiring the
taxpayer to sign a receipt of the property or by
the revenue officer preparing and leaving a list
of the distrained property or by service of a
warrant of distraint or garnishment.
Answer not given
246.
The Bureau of Internal Revenue (BIR) sent an
assessment to the taxpayer on the last day of the
prescribed period to assess deficiency taxes. The
said assessment was sent via registered mail dated
on the last day of the assessment period and
received by the taxpayer two weeks thereafter. The
said assessment is:
a.
b.
c.
d.
Invalid because it was not received by the

taxpayer within the prescribed period to assess.
Valid on the ground that it is deemed
received by the taxpayer on the day it was
mailed.
Valid on the ground that the presumption of
regularity negates the need for personal service.
Invalid because the BIR did not avail of personal
service as a means of delivering the said
assessment.
247.
Do the Regional Trial Courts possess the power
to issue injunctions regarding collection of local
taxes?
a.
b.
c.
d.
No, because the power to enjoin collection of

taxes is within the jurisdiction of the Court of
Tax Appeals.
Yes, provided that there should first be payment
of taxes under protest prior to the grant of the
injunction.
No, because courts are prohibited from issuing
injunctions regarding collection of taxes,
whether national or local, due to the Lifeblood
Doctrine.
Yes, provided that all requisites for
injunction under the Rules of Court are
present, because there is no express
prohibition under the Local Government
Code.
248.
Which of the following statements is NOT
correct?
a.
The Court of Tax Appeals may review tax

cases motu propio under its expanded
jurisdiction.

29
b.
c.
d.
The findings of fact of the Court of Tax Appeals

are binding upon the Supreme Court.
The Court of Tax Appeals may dismiss a petition
for want of jurisdiction even if the question is
not raised in the pleadings or even suggested by
counsel.
The Court of Tax Appeals may review the
findings of the Secretary of Finance in seizure
and forfeiture cases.
249.
XYZ Corporation received from the Bureau of
Internal Revenue (BIR) a preliminary assessment
notice advising it to explain why it should not be
subject of a formal assessment and a letter of
demand. XYZ Corporation should respond to the
said preliminary assessment notice within a period
of:
a.
b.
c.
d.
15 days from issuance of the preliminary

assessment notice
30 days from receipts of the preliminary
assessment notice
15 days from receipt of the preliminary
assessment notice
30 days from issuance of the preliminary
assessment notice
250.
An assessment was being delivered to the
taxpayer before the expiration of the prescriptive
period of assessment. The taxpayer, in order to
avoid receiving the same, refused to receive or sign
any document issued by the BIR. The BIR may, as a
form of alternative service:
a.
b.
c.
d.
Leave a copy of the assessment with any person

in the premises of the taxpayer
Request for a barangay official to witness and
attest that the taxpayer refused to receive a
copy of the assessment
Prepare an affidavit stating the refusal of the
taxpayer to accept the said assessment without
need for leaving a copy of the same in the
premises of the taxpayer
Leave a copy of the said assessment in the
premises of the taxpayer in the presence of
two other officers of the BIR, and prepare a
notarized affidavit of refusal to accept the
said assessment notice on the part of the
taxpayer
251.
For the taxable year 2003, the University of
Northern Cebu (UNC), a proprietary educational
institution, voluntarily paid the Minimum Corporate
Income Tax (MCIT) on April 15, 2004, since the said
MCIT is higher that its computed normal income tax.
A few months later, while you were reviewing the tax
return of UNC for the year 2003, you noticed that
the school failed to report some income of UNC from
school-related activities which would make the
school-related income more than 50% of its income
from all sources; hence, the school should have been
subject to tax at a rate of 10%, and consequently, it
should not also be liable for MCIT. Thus, on June 15,
2005, you, as the tax lawyer of UNC filed an
amended return for your client, which now reflects
that UNC should not be liable for the MCIT. One year

after the filing of the amended return, you filed, on

behalf of UNC, a claim for refund of the MCIT.
Suppose that the Commissioner of Internal Revenue
(CIR) denied your claim for refund on the ground of
prescription, is such action of the CIR legally
justifiable?
a.
b.
c.
d.
No, it is not justifiable because the period of

prescription is three years from the time of the
filing of the return.
Yes, it is justifiable because the counting of
the period of prescription starts from the
filing of the original return, which was April
15, 2004.
No, it is not justifiable because the start of the
period of prescription is at the time of the filing
of the amended return, the amendment being
substantial.
Yes, it is justifiable, but not because of
prescription but because the MCIT was properly
paid, and supervening events should not be
allowed as a basis for the claim for refund.
252.
For the taxable year 2003, the University of
Northern Cebu (UNC), a proprietary educational
institution, voluntarily paid the Minimum Corporate
Income Tax (MCIT) on April 15, 2004, since the said
MCIT is higher that its computed normal income tax.
A few months later, while you were reviewing the tax
return of UNC for the year 2003, you noticed that
the school failed to report some income of UNC from
school-related activities which would make the
school-related income more than 50% of its income
from all sources; hence, the school should have been
subject to tax at a rate of 10%, and consequently, it
should not also be liable for MCIT. Thus, on June 15,
2005, you, as the tax lawyer of UNC filed an
amended return for your client, which now reflects
that UNC should not be liable for the MCIT. One year
after the filing of the amended return, you filed, on
behalf of UNC, a claim for refund of the MCIT.
Suppose that the Commissioner of Internal Revenue
(CIR), in the process of reviewing the return of UNC,
found out that the school did not include certain nonschool related income in its return, which would
make the school liable for more MCIT than what it
had paid. Thus, after complying with the procedural
requirements of law, the BIR, on May 30, 2008,
issued a formal assessment notice to UNC assessing
the deficiency MCIT for taxable year 2003. Is this
act of the CIR legally justified?
a.
b.
c.
d.
Yes, it is legally justified because the

assessment and collection of MCIT does not
prescribe.
Yes, it is legally justified because the
assessment was made within the period of
prescription.
No, it is not legally justified because by then,
the right of the government to assess has
already prescribed.
No, it is not legally justified because the
subsequent discovery cannot give rise to
additional tax liabilities.

30
253.
Where a return was filed, as a general rule, the
prescriptive period for assessment after the date the
return was due or was filed, whichever is later, is
within:
a.
b.
c.
d.
Three years
Five years
Ten years
Two years
254.
The Court of Tax
jurisdiction to review
a.
b.
c.
d.
Appeals
b.
c.
d.
has
no
decisions of the Commissioner of Internal

Revenue on undisputed assessments
decisions of the Commissioner of Customs on
seizure or forfeiture cases where the
Commissioner orders the release of the seized
cargo
in instances where the Commissioner of Internal
Revenue has failed to act on a disputed
assessment within 180 days from submission of
protest by the taxpayer
the inaction of the Commissioner of Internal
Revenue on disputed assessments after the
lapse of 180 days from submission by the
taxpayer of the complete supporting documents
to support a protest
255.
Which of the following
Assessment is incorrect?
a.
(CTA)
statements
about
It is an official action of an officer authorized by

law in ascertaining the amount of tax due from a
taxpayer.
If not contested by the taxpayer within 30 days
from receipt, it becomes final and executory.
It is an action for collection of taxes.
It fixes and determines the tax liability of the
taxpayer.
256.
The Bureau of Internal Revenue (BIR) may
compromise the payment of any internal revenue tax
when
First ground: The tax or any portion thereof appears
to be unjustly or excessively assessed.
Second ground: The administration and collection
costs involved do not justify the collection of the tax.
a.
b.
c.
d.
Both grounds are correct.

Only the second ground is correct.
Both grounds are incorrect.
Only the first ground is correct.
257.
For the calendar year ended December 31,
2010, Park Tower Corporation filed its income tax
return on March 10, 2011. When is the last day for
the Bureau of Internal Revenue (BIR) to make an
assessment concerning the said taxable period,
assuming that the return filed was neither false nor
fraudulent?
a.
b.
c.
December 31, 2013

March 10, 2014
April 15, 2014

d.
April 14, 2014
258.
It is the seizure by the government of personal
property to enforce the payment of taxes, to be
followed by its public sale if the taxes are not
voluntarily paid:
a.
b.
c.
d.
Forfeiture
Distraint
Levy
Garnishment
259.
Taxpayer XYZ Corporation filed its Annual
Income Tax Return for the taxable year 2007 on April
14, 2008. Records of the case show that while the
Bureau of Internal Revenue (BIR) avers that it sent
an Assessment Notice dated February 1, 2011 on
February 6, 2011, taxpayer XYZ Corporation denies
having received an Assessment Notice from BIR.
XYZ Corporation alleges that it came to know of the
deficiency tax assessment only on March 17, 2012
when it was served with the Warrant of Distraint and
Levy. From the foregoing facts, which is correct?
a.
b.
c.
d.
The taxpayer should prove that there was such

notice of assessment received.
The BIR has the burden of evidence to
prove that the assessment has indeed been
sent.
The BIR can invoke the presumption that official
duties were regularly complied with.
The BIR can invoke the presumption under
Section 3(v), Rule 131 of the Rules of Court that
when a mail matter is sent by registered mail,
there exists a presumption that it was received
in the regular course of mail.
260.
A taxpayer received a tax deficiency assessment
of P1,200,000 from the Bureau of Internal Revenue
(BIR) demanding payment within ten (10) days,
otherwise, it would collect through summary
remedies. The taxpayer requested for
reconsideration stating the grounds therefore.
Instead of resolving the request for reconsideration,
the BIR sent a Final Notice before Seizure to the
taxpayer. Which of the following remedies can the
taxpayer avail?
a.
b.
c.
d.
File an injunction before the Regional Trial Court

Appeal to the Court of Tax Appeals
Appeal to the Secretary of Finance
Proceed with Certiorari before the Supreme
Court
261.
A criminal action was filed against Mr. Tampus
for tax fraud. An assessment of about P2,000,000
unpaid taxes was subsequently made. The case will
be filed before:
a.
b.
c.
d.
Court of Tax Appeals (CTA) en banc

Court of Tax Appeals (CTA) division
Department of Justice (DOJ)
Regular Courts (MTC or RTC, as the case may
be)

31
262.
Tax evasion is the use of illegal means to avoid
payment of taxes. There is evasion when:
a.
b.
c.
d.
263.
a.
b.
c.
d.
Sales are understated to lessen the VAT

Indirect taxes are shifted to consumers
Property is transferred in contemplation of death
to lessen estate tax
Depreciation method is used in calling deduction
to lessen the income tax
The Court of Tax Appeals has jurisdiction over:
Decisions of the BIR Regional Directors in the
instances where certain actions to be done is
delegated to them by the BIR Commissioner
under authority of the National Internal Revenue
Code
Decisions of the Tariff Commission which
reversed the imposition of dumping duties by
the Secretary of Agriculture
Decisions of the BIR Commissioner involving
unfair competition over the use of simplified
bookkeeping records
Decisions of the Secretary of Finance where
the government exercises its right of
compulsory acquisition of imported articles
264.
AG obtained a loan from KD in the amount of
P1,000,000. To secure the obligation, KD required
AG to execute a Deed of Absolute Sale covering the
parcel of land owned by AG. At the time of the
execution of the Deed, the parties agreed to pay the
capital gains tax, with the understanding that if AG
makes full payment of the obligation within a period
of six months, RD shall not cause the transfer of the
property to his name. Before the six-month period
expired, AG was paying his obligation to KD but the
latter refused to accept the payment contending that
there was no sale that occurred but merely an
equitable mortgage. After trial, the court decided
after three years that the Deed of Absolute Sale is
actually an equitable mortgage, and ordered KD to
accept payment of the loan from AG and to reconvey
the property. Pursuant to the court decision, KD
accepted the payment from AG and executed a Deed
of Reconveyance. Thereafter, AG instituted a claim
for refund with the BIR to recover the capital gains
tax paid. Should the claim for refund be granted?
a.
b.
c.
d.
No, because the right of the taxpayer to

refund has already prescribed.
Yes, because there was wrongful payment of the
tax, and that supervening event has occurred
that entitled the taxpayer to refund.
Yes, because there was no basis for the payment
and collection of the tax, hence, the principle of
solution indebiti is applicable.
No, because the tax was properly paid by the
parties due to the execution of the Deed of Sale.
265.
The accused, a government employee occupying
a salary grade level of 28, was charged with having
violated the provisions of a tax ordinance for having
willfully and deliberately refused to pay the tax
imposed
upon
his
business
amounting
to
P1,800,000.00.
The penalty imposed by the

ordinance in accordance with the provisions of

Section 516 of the Local Government Code of 1991 is
six (6) months imprisonment. The City Prosecutor
should file the tax evasion case with the:
a.
b.
c.
d.
Metropolitan Trial Court because the imposable

imprisonment is less than six (6) years
imprisonment
Sandiganbayan because the employee has a
salary grade level higher than grade 27
Court of Tax Appeals because of the
amount involved
Regional Trial Court because it is a court of
original jurisdiction and the Court of Tax Appeals
acts only in aid of its appellate jurisdiction being
an appellate court
266.
A car dealer could not pay his taxes on sales.
The dealer delivered several units of his cars to the
Bureau of Internal Revenue (BIR) in payment of the
taxes. Which of the following statements is correct?
a.
b.
c.
d.
There is a valid payment of the tax.

There is in effect a collection of the tax by
distraint.
There is a valid forfeiture of property.
This is not a valid procedure for collection
of the tax.
c.
d.
270.
A parcel of land was located in an area classified
by the local sangguniang bayan as commercial,
however, the said parcel of land remained and is still
used for residential purposes by the owners thereof.
The basis for the classification and taxation of real
property for real estate tax purposes is:
a.
b.
c.
d.
267.
What is the maximum rate of basic real property
tax which may be imposed by a province?
a.
b.
c.
d.
2% of the assessed value of the real property

2% of the fair market value of the real property
1% of the assessed value of the real
property
1% of the fair market value of the real property
268.
Which of the following statements below
regarding the nature of the taxing power of local
government units is NOT correct?
a.
b.
c.
d.
Since the taxing power of local government

units has been granted by the Constitution,
Congress may not set guidelines and
limitations for such exercise.
It is not an inherent power.
Congress cannot enact laws depriving local
government units of the power to tax
It may be exercised only if delegated by the law
or the Constitution.
269.
Which of the following statements regarding the
power of local government units to grant tax
exemption privileges is NOT correct?
a.
b.
Local government units may grant tax

exemptions, tax incentives or tax reliefs through
the issuance of duly approved ordinances.
Any tax exemption or relief granted by a local
government unit to a type of business shall
apply to all businesses similarly situated.

32
Actual use of the property

The classification made by the sanggunian on
the said locality
The determination by the city assessor of the
classification of the said property
The general type used by adjacent properties
representing a significant number within the
locality
271.
Which of the following is NOT liable to pay the
community tax?
a.
b.
LOCAL TAX
The power to grant tax exemption or

incentive applies to regulatory fees
imposed by the local government unit.
In the case of shared revenues, the exemption
or relief granted shall only extend to the local
government unit granting such exemption or
relief.
c.
d.
Persons required by law to file an income tax

return
Resident foreign corporations engaged in
Transient visitors whose stay in the
Philippines does not exceed three (3)
months
Persons who own real properties with an
aggregate assessed value of P2,000,000
272.
A taxpayer who desires to appeal a decision of
the Central Board of Assessment Appeals (CBAA) in
the exercise of its appellate jurisdiction over real
property taxes imposed by a local government unit
may raise the issue before the:
a.
b.
c.
d.
Secretary of Finance
Secretary of Interior and Local Government
Court of Tax Appeals
Supreme Court
273.
Mr. Bryan Ledesma has a one-hectare residential
land located at Green Valley, Baguio City. One-half
portion of the land is occupied by his residence and a
garden, while the other half is vacant. He received a
notice of assessment from the City Treasurer of
Baguio requiring him to pay an idle land tax for his
vacant lot. Mr. Ledesma paid the tax under protest.
His protest, however, was denied by the City
Treasurer. Immediately, he filed a petition before the
Regional Trial Court of Baguio City, questioning the
propriety of the acts of the City Treasurer. Which of
the following is correct?
a.
b.
The action will prosper as the City Treasurer

wrongly assessed Mr. Ledesma of the idle land
tax.
The action will not prosper as the Court has
no jurisdiction over the matter.

c.
d.
The action will not prosper as the taxpayer

should have protested before the assessor.
The action will prosper as Mr. Ledesma complied
with the mandatory requirement of paying the
tax under protest.
274.
Which local government unit (LGU) has the
broadest tax powers under the Local Government
Code?
a.
b.
c.
d.
275.
a.
b.
c.
d.
Barangay
City
Municipality
Province
c.
d.
a direct tax
a specific tax
a property tax
an ad valorem tax

5% of the assessed value of the real
property
277.
In determining the situs of local business tax,
when there is no branch or sales office in the city
where the sale or transaction was made
a.
b.
c.
d.
a.
b.
c.
d.
Real property tax is NOT
276.
In addition to the basic real property tax, a city
may levy an annual tax on idle lands at the rate not
exceeding:
a.
b.
treasurer was fatally flawed for being violative of due

process. Decide.
The sale shall be recorded in the principal office

and the tax shall be paid in the city where the
sale was made.
The sale shall not be recorded in the principal
office but the tax shall be paid in the city where
the sale was made.
The sale shall be recorded in the principal
office and the tax shall be paid in the city
where the principal office is located.
The sale shall be recorded in the principal office
but only 70% of the recorded sales shall be
taxable by the city where the sale was made.
278.
Mr. X sold a parcel of registered land to Mr. Y.
However, Mr. Y was not able to register the sale with
the Register of Deeds, but he already occupied the
said land from the time of the consummation of the
sale. Since Mr. X is no longer the owner of the land,
Mr. X did not anymore pay the real property taxes
thereon. Mr. Y, on the other hand, not knowing that
there is such a thing as real property taxes, did not
also pay the said tax. After three years of nonpayment, the local treasurer assessed Mr. X for the
delinquent real property taxes. Mr. X ignored the
said assessment, which lapsed to finality. The local
treasurer then levied the parcel of land and
scheduled the sale of the property at public auction.
Upon knowledge of this, Mr. Y filed a case for
injunction with the Regional Trial Court (RTC),
alleging that the procedure adopted by the local

33
279.
The procedure is correct. Insofar as the

government is concerned, Mr. X is still the
taxpayer.
The procedure is not correct. Both Mr. X and Mr.
Y should have been notified.
The procedure is flawed. The notice of tax
delinquency should have been addressed to
Mr. Y and not to Mr. X, as he (Mr. Y) is the
owner and lawful possessor of the said
land.
The procedure is correct. The possessor of the
land should be the one notified in this case, it
is Mr. Y.
Statement No. 1
In real property taxation, the real property shall be
classified, valued, and assessed on the basis of its
actual use regardless of where located, whoever
owns it, and whoever uses it.
Statement No. 2
In taxation, the Principle of Preemption refers to an
instance where the national government elects to tax
a particular area, impliedly withholding from the local
government the delegated power to tax the same
field.
a.
b.
c.
d.

Both statements are NOT correct.
280.
A company engaged in the manufacturing
business has the following offices in the Philippines:
(i) Principal office in Quezon City; (ii) Factory in
Muntinlupa; and (iii) Plantation in Sta. Rosa, Laguna.
All sales are recorded in Quezon City. The local
business tax of the company shall be paid as follows:
a.
b.
c.
d.
70% in Quezon City, 30% in Sta. Rosa, 0% in

Muntinlupa
100% in Quezon City, 0% in Sta. Rosa, 0% in
Muntinlupa
30% in Quezon City, 28% (40% of 70%) in
Sta. Rosa, and 42% (60% of 70%) in
Muntinlupa
30% in Quezon City, 42% (60% of 70%) in Sta.
Rosa, and 28% (40% of 70%) in Muntinlupa
281.
Which of the following properties is NOT
exempted from payment of the real property tax?
a.
b.
c.
Machinery and equipment used for pollution

control and environmental protection
Lands and buildings actually, directly, and
exclusively used for religious, charitable or
educational purposes
Machinery and equipment that are actually,
directly, and exclusively used by local water
districts

d.
Real property owned by the Republic of the

Philippines or any of its political
subdivisions, when the beneficial use
thereof has been granted to a taxable
person
d.
From the moment imported articles are sold to a

person who intends to bring the goods within
Philippine jurisdiction
287.
For purposes of the Tariff and Customs Code,
when does importation end?
TARIFF AND CUSTOMS CODE
a.
282.
These are special duties imposed by the
Secretary of Finance upon prior investigation and
report of the Tariff Commission to offset an excise
tax or internal revenue tax upon articles of the same
class manufactured at home.
b.
a.
b.
c.
d.
Discriminatory duties
Marking duties
Dumping duties
Countervailing duties
283.
This special duty is imposed first before banning
the imported article:
a.
b.
c.
d.
Marking duty
Dumping duty
Countervailing duty
Discriminatory duty
284.
Which of the following is NOT a regular customs
duty?
a.
b.
c.
d.
Anti-dumping duty
Ad valorem duty
Compound customs duty
Specific customs duty
285.
What is the relevance of knowing whether or not
importation has officially ended?
a.
b.
c.
d.
Once importation has lawfully ended, the Bureau

of Customs can no longer recover deficient
duties.
Once importation has lawfully ended, the
Bureau of Customs may recover deficient
duties only through judicial means.
Once importation has lawfully ended, the Bureau
of Customs may recover deficient duties only
through administrative means.
There is no relevance.
286.
For purposes of the Tariff and Customs Code,
when does importation begin?
a.
b.
c.
From the moment of entry within Philippine

jurisdiction of a carrier containing imported
articles
From the moment of entry within Philippine
jurisdiction of a carrier containing imported
articles, and the unloading of the said imported
articles here in the country
From the moment of entry within the
Philippine jurisdiction of a carrier
containing imported articles, and there is
an intent to unload the said imported
articles here in the country

34
c.
d.
From the moment the goods are brought

outside customs jurisdiction
From the moment there is payment of
proper duties
From the moment the goods are
brought outside customs jurisdiction,
upon a lawful permit for the release
thereof
From the moment the goods are unloaded
in the Philippines
288.
The Collector of Customs issued a warrant of
seizure and detention against Mr. X for goods
believed to have been smuggled by him. Acting on
such warrant, customs agents went to Mr. Xs
warehouse, forcibly opened the same, and seized the
goods subject of such warrant. Upon these facts,
which of the following is correct?
a.
b.
c.
d.
The warrant is not valid because it was issued

merely by the Collector of Customs and not by
the Commissioner of Customs.
The warrant is void because it was issued not by
the courts and without compliance with the
requirements of the Constitution.
The goods were validly seized because seizure of
smuggled imported articles is among the
functions of the Collector of Customs, as part of
the exercise of his primary jurisdiction.
The goods were validly seized because it
was by virtue of a warrant of seizure issued
by the Collector of Customs which was
already sufficient to effect a valid search
and seizure.
289.
The President of the Philippines, through an
executive order, may
a.
b.
c.
d.
impose anti-dumping duties

impose marking duties
impose countervailing duties
impose discriminatory duties
290.
As a result of a construction boom, where the
demand for steel billets soared to very high levels, a
shortage resulted. Sterling Inc. imported steel billets
(which are not manufactured in the Philippines) from
Russia. The selling price in Russia of the steel billets
is US$100.00 per ton, but they were sold to Pietrus
Inc. at only US$50.00 per ton FOB Russian port. The
Russian government granted a reward of US$5.00
per ton of steel billet which is exported. What taxes
are due on the importation of the steel billets?
a.
b.
c.
d.
Regular customs duties and Anti-dumping duties

Regular customs duties and Countervailing
duties
Only Regular customs duties
Only Anti-dumping duties

291.
Leon, the General Manager of XYZ Corporation,
went to Europe for a pleasure trip. While in Madrid,
Spain, he found out that a 50 oz. bottle of orange
marmalade sells for the equivalent of P20.00 in the
supermarkets. However, when he went to Barcelona,
he found out that a local producer of 50 oz. bottle of
orange marmalade is willing to sell the same for
export at the price of P180.00 per dozen. Sensing a
very good profit opportunity because in the
Philippines, the wholesale price charged by Philippine
manufacturers of a similar bottle of orange
marmalade is P25.00, he decided to import 10,000
dozens of the item into the Philippines.
Under the above circumstances, what possible
special customs may be imposed upon arrival of the
10,000 dozen bottles of orange marmalade in the
Philippines?
a.
b.
c.
d.
Discriminatory duties
Countervailing duties
Anti-dumping duties
Marking duties
292.
Which among the following statements would be
descriptive of a discriminatory duty?
a.
b.
c.
d.
It may be imposed by the Secretary of Finance

upon recommendation of the Secretary of
Foreign Affairs who would know of the
discriminatory practices from the various
ambassadors posted in foreign countries.
The discriminatory duty is imposed in order to
protect Philippine consumers from the influx of
cheap imported goods from other countries.
In the instance where the country of origin
of the products subject to discriminatory
duties persists in its discriminatory
practices against Philippine products, the
President of the Philippines may ban
imports from such countries.
Discriminatory duties are imposed whenever any
product is granted any form of specific subsidy
by the country of origin without granting the
same subsidy to products of other countries.
293.
The President of the Philippines issued an
Executive Order imposing an additional duty of 15%
ad valorem on all imported commodities. The move
of the President was done upon recommendation by
the National Economic Development Authority
(NEDA) that the collection would alleviate the cash
collection of the government because of the delay in
the legislative approval of the additional 2% valueadded tax. The Executive Order is:
a.
b.
Valid, because the President is authorized under

the flexible tariff clause of the Tariff and
Customs Code to issue such Executive Order
Valid, because the issuance in accordance with
sound advice from the NEDA in pursuance of the
interest of the national economy and general
welfare

35
c.
d.
Not valid, because it exceeded the scope of

the presidential prerogative under the
flexible tariff clause
Not valid, because Congress is in session when
the Executive Order was issued which results to
usurpation by the President of the legislative
power to tax.
294.
Fernando and Steve are best friends. Fernando
borrowed the aircraft of Steve. According to
Fernando, he will just use the aircraft to have a
joyride with Jennifer, who was being courted by
Fernando for a long time now. Unknown to Steve,
Fernando made use of the aircraft for smuggling
purposes. Unfortunately for Fernando, his illegal
activities were discovered by customs enforcement
officials. Both Fernando and Steve were sued for
smuggling, and the aircraft as well as the imported
goods therein were subjected to seizure proceedings.
In the criminal case, Steve raised the defense that
he has no knowledge of the criminal acts of
Fernando, thus, it must be Fernando who should be
solely criminally liable. Decide.
a.
b.
c.
d.
The defense is tenable. Steve did not

commit any crime; thus, he should not be
liable.
Steve should be acquitted because smuggling
does not give rise to criminal liability.
Steve should be convicted. Violation of the Tariff
and Customs Code is mala prohibita; hence,
good faith is not a defense.
Steve should be convicted. The crime could not
have been committed were it not for his
participation.
295.
Fernando and Steve are best friends. Fernando
borrowed the aircraft of Steve. According to
Fernando, he will just use the aircraft to have a
joyride with Jennifer, who was being courted by
Fernando for a long time now. Unknown to Steve,
Fernando made use of the aircraft for smuggling
purposes. Unfortunately for Fernando, his illegal
activities were discovered by customs enforcement
officials. Both Fernando and Steve were sued for
smuggling, and the aircraft as well as the imported
goods therein were subjected to seizure proceedings.
In the seizure case, Steve raised the argument that
he has no knowledge of the criminal acts of
Fernando; thus, Steves aircraft must be released
immediately in his favor. Decide.
a.
b.
c.
d.
The argument is tenable. Steve did not violate

any law; thus, his aircraft should be released.
The argument is tenable. Objects should not be
confiscated if they are not illegal per se.
The argument is not tenable. In seizure
proceedings, it is the object itself which is
involved in the illegal activity; hence, the
same may be confiscated.
If Steve is confiscated, the aircraft should be
confiscated; otherwise, it should be released.

ANSWER KEY
GENERAL PRINCIPLES OF TAXATION

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
C [The power of eminent domain affects only

particular property owners, i.e. the owners whose
properties are being taken by the government.]
B [Letter b is a manifestation of the nature of
taxation being a legislative power.]
B
D
C
B
C
C
A
D
B
D
C
B
C
A
D
C
B
B
C
D [Statements I and IV are manifestations of the
legislative nature of taxation.]
B
C
B [Choices A, C, and D all reconcile the two
conflicting opinions while Choice B is an illustration
of the lifeblood doctrine.]
A
B
B
C
D
D [Seemingly, improvement of the sugar industry is
not a public purpose. But the Supreme Court of the
Philippines ruled that since the improvement of the
sugar industry will result in the improvement of the
national economy, the tax is for a public purpose.]
B [On franchise given under any of the different
Philippine Constitutions, the grant of a franchise is
conditional in that, by its terms, the franchise is
subject to alteration, amendment or revocation
anytime by the state. The franchise grantee agreed
to this. An amendment of a law of general
application has the effect of an amendment of the
franchise.]
D
B
B
A
C
B [Under the Local Government Code, local
governments are given the power to impose local

36
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
taxes. One limitation on the taxing power of the

local government is that the tax imposed should be
uniform. In local taxation, uniformity is required
only within the territory of the taxing authority.
Hence, one local government unit can have taxes at
different amounts from that of another local
government unit.]
C
B
B
B [This is a legitimate exercise of police power. This
would regulate the number of vehicles and relieve
traffic congestion.]
A
D
A
B
D
C
A
C
D
C
B
C [The penalty for non-payment of a tax is fine
and/or imprisonment. There is only one tax the
non-payment of which will not result in
imprisonment. Under the Philippine Constitution, no
person shall be imprisoned for non-payment of a poll
tax.]
C
D
C
C
D
B
C
B
C
B
C
D [A tax is not necessarily a regular payment. For
example, a tax on transactions is payable only when
transactions is made.]
INCOME TAX
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
D
B
C
D
D
A
B
D
D
C
A

78. A
79. B
80. D
81. D
82. B
83. C
84. A
85. A
86. B
87. D
88. B
89. B
90. C
91. D
92. C
93. A
94. A
95. A
96. A
97. A
98. B
99. C
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
126.
127.
128.
129.
130.
131.
132.
133.
134.
135.
136.
137.
138.
139.
140.
141.
142.
143.

144.
145.
146.
147.
148.
149.
150.
151.
152.
153.
154.
155.
156.
157.
158.
159.
160.
C
A
C
A
C
A
D
C
B
D
A
D
D
D
B
B
A
ESTATE TAX
D
B
B
A
D
A
C
B
A
D
D
C
C
D
C
A
B
D
D
C
B
D
D
A
B
A
A
B
A
A
A
D
D
A
B
A
C
D
A
A
A
A
C
D

37
161.
162.
163.
164.
165.
166.
167.
168.
169.
170.
171.
172.
173.
174.
175.
176.
177.
D
D
C
D
C
B
D
B
D
D
B
C
B
D
D
A
B
DONORS TAX
178.
C
179.
C
180.
A
181.
B (Such statement is not correct if there is a
donation made to strangers.)
182.
A
183.
D
184.
D
185.
C
186.
D
187.
B
188.
A
189.
C
190.
A
VALUE-ADDED TAX
191.
B
192.
C
193.
B
194.
B
195.
A
196.
D
197.
D
[Source: PAGCOR vs. Bureau of Internal Revenue,
G.R. No. 172087 dated March 15, 2011]

198.
B
199.
A
200.
B
201.
D
202.
C
203.
B (Reason: The law provides that consignment
of goods is subject to VAT only if actual sale is not
made within 60 days following the date such goods
were consigned.)
204.
D
205.
B
206.
B
207.
C
208.
D
209.
A
210.
C
211.
B
212.
D
213.
B
214.
D
215.
D
216.
A
217.
A
TAX REMEDIES
218.
219.
220.
221.
222.
223.
224.
225.
226.
227.
228.
229.
230.
231.
232.
233.
234.
235.
236.
237.
238.
239.
240.
241.
242.
243.
244.
245.
246.
247.
248.
249.
250.
251.
252.
253.
254.
255.
256.
257.
A
D
B
B
A
A
B
C
A
C
A
A
D
B
C
A
A
C
C
C
D
C
B
C
C
A
C
B
B
D
A
C
D
B
B
A
A
C
C
C

38
258.
B
259.
B
260.
B
261.
B
262.
A
263.
D
264.
A
265.
C
[Under Republic Act No. 1125, as amended by
Republic Act No. 9282, the Court of Tax Appeals has
exclusive original jurisdiction over all criminal
offenses arising from violations of the National
Internal Revenue Code, the Tariff and Customs
Code, and other laws administered by the Bureau of
Internal Revenue or the Bureau of Customs where
the principal amount of taxes and fees (exclusive of
surcharges and penalties) claimed is P1 million or
over.]
266.
D
[Taxes are payable in money. When the taxpayer
cannot pay in money, his properties may be held
answerable, but according to the procedures
provided in the law. The procedure under the law
against personal property is distraint.
Voluntary
payment with personal property is not authorized by
the law.]
LOCAL TAX
267.
268.
269.
270.
271.
272.
273.
274.
275.
276.
277.
278.
279.
280.
281.
C
A
C
A
C
C
B
B
B
B
C
C
A
C
D
TARIFF AND CUSTOMS CODE

282.
D
283.
D
284.
A
[Anti-dumping duty is a special customs duty while
all the others are regular customs duties.]
285.
B
286.
C
287.
C
288.
D
289.
D
[Choices A and C are NOT correct because it is either
the Secretary of Trade and Industry or the Secretary
of Agriculture that imposes the anti-dumping and
countervailing duties. Choice B is NOT correct
because it is the Commissioner of Customs that
imposes the marking duty.]
290.
C
[No special duties, such as anti-dumping duty and
countervailing duty, are to be imposed because

there is no showing that the importation causes or

threatens injury to an existing industry or retards
the establishment of a like or similar industry in the
Philippines.]
291.
C
[Choice C is the correct answer because there is
export into the Philippines at a price (P180.00 per
dozen = P15.00 per bottle) lower than normal value
for home consumption (P20.00) and this results to
detriment to the local orange marmalade
manufacturers. There is detriment because the
import price of P15.00 is lower than the local selling
price of P25.00 per bottle, therefore, nobody would
buy the higher priced local product. This could
result to closure of the local manufacturers.]
292.
C
[Choice C is the appropriate answer. Since the
imposition of the discriminatory duties did not serve
as a deterrent to the discrimination, then the more
drastic retaliatory mode of banning imports may
convince the other country to stop the discriminatory
practices. Choice A is not correct because it is the
President of the Philippines that imposes the
discriminatory duty. Choice B is not correct, as it is
descriptive of anti-dumping duty. Finally, Choice D
has reference to countervailing duty.]
293.
C
[Under the flexible tariff clause, the President is
authorized to impose additional duty on all imports
not exceeding 10% ad valorem. The President has
exceeded her prerogative.]
294.
A
295.
C

39

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University of Cebu

Bar Operations 2012: Ace the Bar, Race the Car!

For Private and Personal Use Only

Tax Law Multiple Choice Questions

UCLASS Bar Operations: Tax Law Society

GENERAL PRINCIPLES OF TAXATION

The following are similarities of the inherent power of

Taxes may be imposed to raise revenues or to

Tax laws, being imposition of burden, shall be strictly

The power co-exists with the existence of the

Which of the following statements is NOT correct?

Courts cannot issue an injunction to enjoin the

Which is NOT a characteristic of the power of

A person who refuses to pay the tax

The defense available to a taxpayer who is required

That the tax is levied for a religious purpose

Bar Operations 2012: Ace the Bar, Race the Car!

Both tax laws and GAAP shall be enforced;

Double taxation is not unconstitutional but double

Non-impairment of obligations of contract

In case of conflict between tax laws and generally

Among the nature of taxation is that it is an inherent

Are necessary attributes of sovereignty;

Real estate tax and income tax are collected on

How is a tax distinguished from a license fee?

Non-payment of tax does not necessarily

10. Which of the following statements is NOT correct?

Taxes may be imposed to raise revenues or to

11. Which statement refers to

It can only be imposed on specific property or

12. One of the characteristics of internal revenue laws is

Tax Law Multiple Choice Questions

UCLASS Bar Operations: Tax Law Society

13. Which of the following is NOT an example of an

14. The Municipality of Bogo in the province of Cebu has

No. The refusal of the mayor is unjustified

15. Which of the following is not a scheme of shifting the

The manufacturer transfers the tax to the

16. The following statements are presented to you for

Both statements are correct

Bar Operations 2012: Ace the Bar, Race the Car!

statement is correct; the second

17. The City Government of Cebu, claiming that it can

The power of taxation cannot be delegated.

18. An annual tax of P500.00 was imposed upon all

violative of the equal protection clause of the

19. Which is NOT an essential characteristic of a tax?

20. Which of the following violates the inherent limitation

A supplier of school supplies for the Department

21. A tax does not meet the public purpose limitation if

is for the welfare of the nation or greater portion

Tax Law Multiple Choice Questions

UCLASS Bar Operations: Tax Law Society

is for the benefit principally of limited

22. Consider the following statements:

The power of taxation involves the promulgation

Statements I and II are both manifestations of

24. Taxes are assessed for the purpose of generating

Taxes are pecuniary in nature.

25. Justice Marshall said that the power to tax involves

The imposition of a valid tax could not be

Bar Operations 2012: Ace the Bar, Race the Car!