NATIONAL COLLEGE OF BUSINESS AND ARTS

Cubao-Fairview-Taytay
FIRST SEMESTER SY 2015-2016
MID-TERM DEPARTMENTAL EXAMINATIONS 2 HRS
TAXATION 1 INCOME TAXATION

INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one
answer for each item by shading the corresponding letter of your choice on the answer sheet
provided. STRICTLY NO ERASURES ALLOWED. Use Pencil No. 2 only.

1. Statement I. A taxpayer may appeal to the Court of Tax Appeals.

Statement II. The government may appeal to the Court of Tax Appeals.
A. Both statements are correct.
B. Statement I is correct; Statement II is false.
C. Statement I is false; Statement II is true.
D. Both statements are false.

2. Statement I. When the Bureau of Internal Revenue decided a protested assessment with finality,
the period to appeal to the Court of Tax Appeals is counted from the date of the decision.
Statement II. The decision of the BIR Commissioner on a protested assessment should state that
it is a final decision in order that it may be appealable to the Court of Tax Appeals.
A. Both statements are correct.
B. Statement I is correct; Statement II is false.
C. Statement I is false; Statement II is true.
D. Both statements are false.

3. Date of death-March 2, 2007. Date the estate tax was filed-April 10, 2007. Last day of the BIR to
make an assessment for a deficiency estate tax.
A. March 2, 2010
B. April 2, 2010
C. April 10, 2010
D. September 2, 2010

4. Date the national internal revenue tax was paid-April 10, 2008. Claim for refund was filed with the
BIR-March 10, 2009. Date decision of denial of refund was received-March 21, 2010. Last day to
appeal to the Court of Tax Appeals:
A. April 20, 2010
B. April 10, 2010
C. April 21, 2010
D. Answer not given

5. Date assessment was received-February 8, 2010. Petition for reconsideration was filed with the
BIR on February 18, 2010. Documents supporting the petition were filed with the BIR on
February 28, 2010. Decision of denial of the petition was received on March 11, 2010. Second
request for reconsideration was filed with the BIR on March 21, 2010. Date revised assessment
was received was April 2, 2010. Last day to appeal to the Court of Tax Appeals:
A. April 22, 2010
B. May 2, 2010
C. May 3, 2010
D. Answer not given

6. Statement I. The power to interpret provisions of the National Internal Revenue Code and other
tax laws shall be under the exclusive and original jurisdiction of the Commissioner of Internal
Revenue, subject to review by the Secretary of Finance.
Statement II. The power to decide disputed assessment and refunds of internal revenue taxes is
vested in the Commissioner of Internal Revenue, subject to the exclusive appellate jurisdiction of
the Court of Tax Appeals.
TAXATION 1 INCOME TAX

A. Both statements are correct.

B. Statement I is correct; Statement II is false.
C. Statement I is false; Statement II is true.
D. Both statements are false.

7. Statement I. When a tax period is terminated, any unpaid tax is due immediately.
Statement II. The Commissioner of Internal Revenue has authority to terminate the tax period of
a taxpayer who is retiring from a business subject to tax, or is intending to leave the Philippines
or to remove his property or to hide or conceal his property or to perform an act tending to
obstruct the collection of taxes.
A. Both statements are correct.
B. Statement I is correct; Statement II is false.
C. Statement I is false; Statement II is true.
D. Both statements are false.

8. Which of the following powers of the Commissioner of Internal Revenue MAY be delegated?
A. To recommend the promulgation of rules and regulations by the Secretary of Finance
B. To issue rulings of first impression or to reverse, revoke, or modify any existing ruling of the
Bureau of Internal Revenue
C. To compromise or abate a by tax liability
D. To assign or reassign internal revenue officers to establishments where articles subject to
excise taxes are produced or kept

9. Statement I. The Commissioner of Internal Revenue may terminate the tax period of a taxpayer,
and collect taxes due at such termination, should the taxpayer do an act that will make the
proceedings for the collection of the tax totally or partially ineffective.
Statement II. The Commissioner of Internal Revenue may accredit and register tax agents who
prepare and file returns, reports, protests, etc. with, or who appear before, the Bureau of Internal
Revenue
A. Both statements are correct.
B. Statement I is correct; Statement II is false.
C. Statement I is false; Statement II is true.
D. Both statements are false.

10. Statement I. All taxes imposed and collected by the Bureau of Internal Revenue are internal
revenue taxes.
Statement II. The real estate tax is a local tax.
A. Both statements are correct.
B. Statement I is correct; Statement II is false.
C. Statement I is false; Statement II is true.
D. Both statements are false.

11. In case of conflict between tax laws and generally accepted accounting principles (GAAP)
A. Both tax laws and GAAP shall be enforced.
B. GAAP shall prevail over tax laws.
C. Tax laws shall prevail over GAAP.
D. The issue shall be resolved by the courts.

12. Which of the following has no power of taxation?

A. Provinces
B. Municipality
C. Barangay
D. Barrio

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13. A tax must be imposed for a public purpose. Which of the following is NOT a public purpose?
A. National defense
B. Public education
C. Improvement of the sugar industry
D. None of the above

14. A revenue regulation, as a source of tax law, is

A. Promulgated by the Bureau of Internal Revenue
B. Promulgated by the Department of Finance
C. Promulgated by the Department of Finance upon the recommendation of the Bureau of
Internal Revenue
D. An interpretation of the revenue law by the Bureau of Internal Revenue

15. Statement I. A tax that is allowed by law to be passed on by a taxpayer to another is called an
indirect tax.
Statement II. Business taxes which are not allowed by law to be passed on by sellers of goods
and services to buyers are nonetheless imperceptibly passed on because they are factored in on
the selling price.
A. Both statements are correct.
B. Statement I is correct; Statement II is false.
C. Statement I is false; Statement II is true.
D. Both statements are false.

16. Statement I. Tax evasion, which is the use of means to escape a tax that is already a liability, is
prohibited by law, and is punishable.
Statement II. Tax avoidance which is the use of means to prevent an accrual of a tax, or to
minimize a tax that may accrue, is likewise prohibited by law and is punishable.
A. Both statements are correct.
B. Statement I is correct; Statement II is false.
C. Statement I is false; Statement II is true.
D. Both statements are false.

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

A. It is unlimited as to amount.
B. It is payable in money.
C. It is proportionate in character.
D. It is a regular payment.

18. The City of Manila, 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 Manila objected for the various reasons given
below. Which would justify the objection of the banks?
A. The rule on double taxation
B. The power of taxation cannot be delegated.
C. Uniformity in taxation
D. None of the above

19. That the legislative body can impose a tax at any amount underscores the legal truism that:
A. Taxation is an inherent power of the state.
B. Taxation is a very broad power of the state.
C. Taxation is essentially a legislative power.
D. All of the above.

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TAXATION 1 INCOME TAX

20. Which statement is false?

A. A tax is a demand of sovereignty while a toll is a demand of property ownership.
B. Non-payment of a tax does not make the activity taxed unlawful.
C. Customs duty is a tax.
D. A grant of police power to a unit of local government carries with it a grant of the power to
tax.

21. Who is not a Philippine income taxpayer?

A. A resident citizen of the Philippines with income from within and outside the Philippines.
B. A resident citizen of the Philippines with income from within the Philippines only.
C. A nonresident citizen of the Philippines with income from outside the Philippines only.
D. A nonresident citizen of the Philippines with income from within and outside the Philippines.

22. On capital gains tax, which of the following statements is false?

A. The tax should be paid, if in one lump sum, within 30 days from the date of sale.
B. The term initial payment is synonymous to downpayment.
C. The installment payment of the tax should be made within 30 days from receipt of each
installment payment on the selling price.
D. The tax may be paid in installment if the initial payment do not exceed 25% of the selling
price.

Items 22 to 26 are based on the following information:

A resident citizen of the Philippines had the following cumulative data on his profession in 2014:
Q1 Q2 Q3 Year
Gross revenue 100,000 230,000 370,000 500,000
Interest on bank deposits 2,000 4,000 6,000 8,000
Direct cost of services 30,000 69,000 110,000 150,000
Other costs/expenses 10,000 23,000 37,000 50,000

23. Income tax due at the end of the year

A. 50,000
B. 6,750
C. 13,750
D. 28,850

24. Taxable income for Q1

A. 60,000
B. 70,000
C. 7,000
D. 100,000

25. Taxable income for Q3

A. 21,150
B. 260,000
C. 223,000
D. 43,250

26. Income tax due for Q3

A. 21,150
B. 28,150
C. 43,250
D. 36,250

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Items 27 to 31 are based on the following information:

A domestic corporation had the following data in five years:
Year 4 Year 5 Year 6 Year 7 Year 8
RCIT 32,000 8,000 10,000 22,000 50,000
MCIT 65,000 2,000 30,000 20,000 20,000
27. Income tax due for Year 4
A. 32,000
B. 65,000
C. 80,000
D. nil

28. Income tax due for Year 5

A. 8,000
B. 2,000
C. (57,000)
D. nil

29. Income tax due for Year 6

A. 10,000
B. (35,000)
C. 30,000
D. nil

30. Income tax due for Year 7

A. 22,000
B. 16,000)
C. 20,000
D. nil

31. Income tax due for Year 8

A. 30,000
B. 50,000
C. 28,000
D. nil

Items 32 to 36 are based on the following information:

RICH & CO. is a general professional partnership in trade with partners RICH and RICHY sharing
in the partnership net income or loss at 60% and 40%, respectively. In the current taxable year,
RICH & CO. had:
Gross income 1,000,000
Operating expenses 600,000
Capital gain on direct sale to buyer of shares
of stock of domestic corporation 50,000
Interest on Philippine currency bank deposit 20,000
Withdrawal by RICHY:
Out of accumulated profits of prior year 50,000
Out of current year profits 150,000
In the same taxable year, RICHY had A gain on sale of real property
in the Philippines at a selling price at its fair market value of 4M 1,000,000
A gain on a direct sale to a buyer of shares of stock
of a domestic corporation at a selling price of 300K 150,000
32. Final tax on share in the net income after tax of the partnership
A. 13,740
B. 14,000
C. 13,840
D. 13,900
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33. Net income of the partnership after tax

A. 343,500
B. 350,000
C. 346,000
D. 347,500

34. Final tax on the sale of real property

A. 60,000
B. 240,000
C. 180,000
D. 400,000

35. Final tax on sale of shares of stock

A. 15,000
B. 10,000
C. 30,000
D. 25,000

36. Aggregate final income tax

A. 263,900
B. 264,000
C. 263,840
D. 263,740

Items 37 to 40 are based on the following information:

The Abroad Co., a domestic corporation in its 10th year of operations, with a net loss of 400,000
in the preceding fiscal year, had the following information for the current fiscal year ending June
30:
Gross profit from sales 2,000,000
Expenses from operations 1,000,000
Dividend income from domestic corporation 50,000
Dividend income from resident corporation 60,000
Interest income from notes receivable 20,000
Interest income from PH currency bank deposit 90,000
Capital gain on direct sale to buyer of shares of
stock of a domestic corporation 100,000
Income tax paid, Q1-Q3 125,300
Appropriation for bonds maturing within the
fiscal year ending June 30 200,000
Dividends declared during the year 500,000

37. IAET amount

A. 36,716
B. 39,300
C. 35,900
D. 107,940

38. Taxable income for the year

A. 680,000
B. 1,080,000
C. 700,000
D. 760,000

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39. Income tax still due

A. 78,700
B. 227,000
C. 204,000
D. 700,000

40. Improperly accumulated earnings

A. 367,160
B. 393,000
C. 359,000
D. 1,079,400

Items 41 to 46 are based on the following information:

Mr. Jaime and Mrs. Cersei Lannister, husband and wife, with 3 children, the eldest of whom is
12 years old, had:
Mr. Jaime and Mrs. Cersei Lannister:
Rent income 300,000
Expenses 100,000
Income tax withheld by the lessee from rental payments
(5% of 300,000) 15,000

Mr. Jaime Lannister

Professional fees- gross income from profession 600,000
Expenses, practice of profession 200,000
Income tax withheld from professional fees 60,000
Income tax paid (Q1-Q3) 10,000

Mrs. Cersei Lannister

Gross compensation income, after statutory deductions 204,000
Gain on sale of bonds held for 6 months 20,000
Income tax withheld on compensation 6,100

41. Taxable income-Mr. Lannister

A. 450,000
B. 500,000
C. 550,000
D. 375,000

42. Taxable income-Mrs. Lannister

A. 124,000
B. 199,000
C. 274,000
D. 296,000

43. Income tax due-Mrs. Lannister

A. 23,650
B. 31,150
C. 29,750
D. 37,250

44. Income tax due- Mr. Lannister

A. 32,500
B. 100,000
C. 110,000
D. 40,000

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45. Income tax still due- Mr. Lannister

A. 32,500
B. 100,000
C. 110,000
D. 40,000

46. Income tax still due- Mrs. Lannister

A. 23,650
B. 31,150
C. 29,750
D. 37,250

47. Statement I. The minimum corporate income tax of a trading or manufacturing concern is based
on gross profit from sales.
Statement II. The minimum corporate income tax of a service concern is based on net revenues
or receipts less direct cost of services.
A. Both statements are correct.
B. Statement I is correct; Statement II is false.
C. Statement I is false; Statement II is true.
D. Both statements are false.

48. All, except one, may claim personal exemptions. Which is the exception?
A. Citizen
B. Resident alien
C. Non-resident alien engaged in business
D. Non-resident alien not engaged in business

49. Which statement is wrong?

A. A resident citizen and a resident alien has a final tax of seven and one-half percent on
interest on foreign currency deposit under the expanded foreign currency deposit system
B. A non-resident citizen is exempt from income tax on interest on foreign currency deposit
under the expanded foreign currency deposit system.
C. A non-resident alien engaged in business in the Philippines is subject to a final tax of 25%
on gross income from within the Philippines from cinematographic films.
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 bank deposits

50. All, except one, of the following, are not subject to the improperly accumulated earnings tax.
Which is the exception?
A. Publicly-held corporations
B. Service enterprises
C. Insurance companies
D. Financial intermediaries

*** END ***

God Bless!

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