PHILIPPINE INCOME TAXATION - SUPPLEMENTAL QUIZZES PART 1

(CHAPTERS 1-6)

Student Name Princess Joy A. Rosalin Date Submitted

Course Cose/Title BSMA 2-1 Score

CHAPTER 1. INTRODUCTION TO TAXATION

1. That courts cannot issue injunction against the a. Doctrine of equitable recoupment
government's effort to collect taxes is justified by b. The Lifeblood Doctrine
a. the lifeblood doctrine. c. The benefit received theory
b. the ability to pay theory. d. The Holmes Doctrine
c. imprescriptibly of taxes.
d. the doctrine of estoppel. 8. Statement 1: Taxation is the rule, exception is the
exemption.
2. The point at which tax is levied is also called: Statement 2: Vague taxation laws are interpreted
a. Impact of taxation liberally in favor of the government. Which is false?
b. Situs of taxation a. Statement 1
c. Incidence of taxation b. Statement 2
d. Assessment c. Both Statements
d. Neither Statements
3.Which of the following inappropriately describes the
nature of taxation? 9. Statement 1: The benefit received theory
a. Inherent in sovereignty presupposes that some taxpayers within the territorial
b. Essentially a legislative functioning jurisdiction of the Philippines will be exempted from
c. Subject to inherent and constitutional limitation paying tax so long as they do not receive benefits from
d. Generally for public purpose the government.
Statement 2: The ability to pay theory suggests that
4. Which is correct? some taxpayers may be exempted from tax provided
a. Tax condonation is a general pardon granted by the they do not have the ability to pay the same.
government. Which statement is true?
b. The BIR has five deputy commissioners. a. Only statement 1
c. The government can still collect tax in disregard of a b. Only statement 2
constitutional limitation because taxes are the lifeblood c. Both statements 1 and 2
of the government. d. Neither statement 1 nor 2
d. The President of the Philippines can change tariffs or
imposts without the necessity of calling Congress to 10. Select the incorrect statement
pass a law for that purpose. a. The power to tax includes the power to exempt.
b. Exemption is construed against the taxpayer and in
5. Which is not an object of taxation? favor of the government.
a. Persons c. Tax statutes are construed against the government in
b. Business case of doubt.
c. Transactions d. Taxes should be collected only for public
d. Public properties. improvements.

6. The power to enforce proportional contribution from 11. Which is not a public purpose?
the people for the support of the government is a. Public education
a. Taxation b. National defense
b. Police power c. Transportation
c. Eminent domain d. None of these
d. Exploitation
12. Which does not properly describe the scope of
7. This theory underscores that taxes are indispensable taxation?
to the existence of the a. Comprehensive
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b. Discretionary a. Yes, because the measure adopted is grounded upon
c. Unlimited necessity.
d. Supreme b. Yes, because the President is merely exercising his
presidential discretion.
13. All of these are secondary purposes of taxation c. No, because the power of taxation is non-delegated
except d. No, because only the Department of Finance can issue
a. To reduce social inequality such a ruling.
b. To raise revenue for the support of the government
c. To encourage growth of local industries 19. Which limitation of taxation is the concept of "situs
d. To protect local industries of taxation" based?
a. Territoriality
14. The agreement among nations to lessen tax burden b. Public purpose
of their respective subjects is called c. International comity
a. Reciprocity d. Exemption of the government
b. International comity
c. Territoriality 20.nWhich tax exemption is irrevocable?
d. Tax minimization a. Tax exemption based on contract
b. Tax exemption based on the Constitution
15. The Constitutional exemption of non-stock, non- c. Tax exemption based on law
profit educational institutions refers to d. Both A and B
a. Real property tax
b. Income tax
c. Property tax and income tax CHAPTER 2. TAXES, TAX LAWS AND TAX
d. Business tax ADMINISTRATION

16. Which of the following is violative of the principle of 1. Which is not a source of tax law?
non-delegation? a. CHED regulations
a. Requiring that legislative enactment must exclusively b. BIR Rulings
pertain to Congress c. Judicial decisions
b. Authorizing the President to fix the amount of impost d. Constitution
on imported and exported commodities
c. Authorizing certain private corporation to collect 2. When tax is collected upon someone who is
taxes effectively reimbursed by another, the tax is regarded as
d. Allowing the Secretary of Finance and the BIR to issue a. direct
regulation or rulings which go beyond the scope of a tax b. indirect.
law c. personal
d. Illegal.
17. Which of the following violates Constitutional
provisions? 3. All are ad valorem taxes, except one. Select the
a. Payment of salaries to priests or religious ministers exception.
employed by the Armed Forces of the Philippines a. Poll tax
b. Imposing tax on properties of religious institutions b. Estate tax
which are not directly and exclusively used for religious c. Real property tax.
purposes d. Capital gains tax on real property capital asset
c. Imposition of license for the sale of religious
literature 4. Taxation power can be used to destroy
d. Authorizing the President of the Philippines to fix the a. as a revenue measure.
rates of tariffs or imposts b. as an implement of police power.
c. even if the tax is invalid.
18. In order to phase-out a huge deficit, the President of d. when the State is in dire need of funds.
the Philippines passed a law offering all taxpayers with
previous tax delinquency to pay a minimum tax in 5. Which is a national tax?
exchange for relief from tax assessment in the period of a. Real property tax
delinquency. Is this a valid exercise of taxation power? b. Community tax
c. Income tax
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d. Professional tax 12. Which is not an excise tax?
a. Income tax
6. Which of the following distinguishes license from tax? b. Community tax
a. Unlimited in imposition c. Estate tax
b. Does not renders business illegal d. Occupation tax
c. Imposed for revenue
d. Pre-activity in application 13. Tax rulings are issued by the
a. Secretary of Finance
7. Which is correct? b. Supreme Court
a.Taxes may be subject to compensation. c. Court of Tax Appeals
b. Toll, being a demand of ownership, is exercised only d. Commissioner of Internal Revenue
by private entities.
c. Dacion en pago and cession in payment are applicable 14.bWhich is not an element of tax?
to taxation. a. It must be for public purpose
d. Special assessment applies only when public b. It must not violate Constitutional or inherent
improvement is made. limitations.
c. It must be progressive by nature
8. Tax as to determination of amount is classified as d. It must be uniform and equitable.
a. Fiscal or regulatory
b. Direct or indirect tax 15. Tax as to purpose does not include
c. National or local tax a. Revenue
d. Specific or ad valorem tax b. Regulatory
c. Sumptuary
9. I. Tax must not violate Constitutional and inherent d. Poll
limitations.
II. Tax must be uniform and equitable. 16. When the impact and incidence of taxation are
III. Tax must be for public purposes. merged into the statutory taxpayer, the tax is known as
IV. Tax must be levied by the lawmaking body. a. Personal tax
V. Tax must be proportionate in character. b. Direct tax
VI. Tax is generally payable in money. c. Indirect tax
Which of the above is/are not an essential characteristic d. National tax
of a valid tax?
a. All of the above 17. Which of the following levy is fiscal or revenue by
b. All except VI nature?
c. None, except VI a. Tax law geared to phase out a deficit balance of the
d. None of the above government.
b. Tax law intended to prohibit gambling in the
10. Tax as to rates excludes Philippines.
a. Specific tax c. Tax law intended to protect local industries.
b. Progressive tax d. Tax law supporting the development of a particular
c. Mixed tax industry.
d. Proportional tax
18. Tax as to object includes
11. To limit the production of an environmentally a. Personal tax
harmful commodity, Congress passed a law subjecting b. Property tax
the sales of an environmentally unfriendly commodity c. Excise tax
to a P10/kilo tax but a 5% tax is imposed on sales d. All of these
exceeding P100,000.
Which is incorrect? 19. Which is not an indirect tax?
a. The tax is a combination of an ad valorem tax and a. Duties
specific tax. b. Impost
b. This is an example of a regulatory tax. c. Excise tax
c. This is a national tax. d. Personal tax
d. This is a local tax.
20. A tax that cannot be avoided is
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a. Direct tax a. Damages received from patent infringement suit
b. Indirect tax b. Unrealized income from investments
c. Specific tax c. Gain on sale of goods
d. Personal tax d. Inheritance

8. Which of the following constitutes taxable income?

CHAPTER 3. INTRODUCTION TO INCOME TAX a. Return of premium on life insurance received by the
insured
b. Moral damages received from slander
1. When paid for, which of the following items may c. Proceeds of crop insurance
involve a return on capital? d Compensation for personal injury
a. House and lot
b. Life 9. Which is specifically exempted from income taxation
c. Dignity by virtue of legal exemption?
d. Health a. Minimum wage
b. Gain on sale of prohibited drugs
2. Which is not a requisite of gross income? c. Unrealized gain
a. Return on capital d. All of these
b. Realized benefit
c. Exempted by law 10. Which of the following is not a constructive receipt
d. Not exempted by law of income?
a. Forgiveness of indebtedness in consideration of
3. Which is the taxable item of income? service
a. Increase in numbers of a herd of animals b. Matured detachable interest coupons
b. Compensation for personal injuries c. Deposit of income to taxpayer's bank accounts
c. Moral damages d. Cash salary of an employee
d. Interest on moral damages
11. Transfers for insufficient consideration are subject
4. Income tax may be imposed for the following to
purposes, except a. Income tax
a. To limit corruption b. Transfer tax
b. To provide large amounts of revenues c. Either a or b
c. To offset regressive sales and consumption taxes and d. Both a or b
wealth
d. To mitigate the evils arising from the inequalities in 12. Rica paid P20,000 annual premium on a life
the distribution of income insurance contract which would pay her P1,000,000 in
case of her death. After paying for 4 years, Rica assigned
5. Which is not an item of gross income because of the the policy to Carlos for P120,000. Compute the return
absence of an undertaking from the taxpayer? on capital.
a. Proceeds of a life insurance policy a. P120,000
b. Forgiveness of indebtedness as an act of gratuity b. P80,000
c. Revaluation surplus on properties c. P40,000
d. Service fees d. P0

6. Which is subject to income tax? 13. Sophia purchased a P1,500,000 life insurance policy
a. Proceeds of life insurance policy received by the for P100,000. During the year, Sophia died and her heirs
family of the insured collected the entire proceeds. How much of the
b. Excess of proceeds over the premiums paid received proceeds is exempt from income tax?
by the taxpayer a. P1,500,000
c. Life insurance proceeds received by the corporation b. P1,400,000
from the insurance of a deceased officer c. P100,000
d. None of these d. P0

7. Which of the following is exempted from income 14. Sean negotiated a P1,000,000 non-interest bearing
taxation because of the absence of ability to pay? promissory note to Candy. Candy paid Sean P950,000.
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On the due date, Sean paid Candy P1,000,000. Which is  P100,000 for his Attorney's fees Compute
true? Johnson's return on capital.
a. Sean earned P50,000 return on capital a. P800,000
b. Candy earned P50,000 return on capital b. P300,000
c. Candy received P50,000 donation c. P200,000
d. Candy received P1,000,000 return of capital d. P0

15. Andrew received a total sum of P42,000 from his 19. Clyde received the following items during the year:
employer consisting of the following:  P200,000 donation from a girlfriend
 P5,000 reimbursements for employer's  P100,000 service fee from professional services
expenses paid by Andrews  P300,000 inheritance from his deceased father
 P15,000 payment of Andrew's computer set  P100,000 income from illegal gambling
purchased by the employer  P50,000 gain on sale of his personal car
 P22,000 monthly salary  P250,000 profits from his bar restaurant
Compute the total income subject to income tax.
Andrew's computer set cost him P12,000. Compute the a. P500,000
total return on capital which can be subjected to income b. P1,050,000
tax. c. P750,000
a. P42,000 d. P550,000
b. P37,000
c. P25,000 20. An alien received P200,000 compensation income in
d. P22,000 the Philippines and P300,00 rental income from abroad.
How much will be subject to Philippine Income Tax?
16. Carl sued an unscrupulous person for derogatory a. P200,000
remarks which he considered to have besmirched his b. P300,000
reputation. The court awarded him an indemnity of c. P500,000
P1,000,000 inclusive of P200,000 reimbursement for d. P0
Attorney's fees and P100,000 exemplary damages.
Compute Carl's total return on capital.
a. P1,000,000 CHAPTER 4. INCOME TAX SCHEMES, ACCOUNTING
b. P800,000 PERIODS, METHODS, AND REPORTING
c. P700,000
d. P0 1. Which is not a feature of final tax?
a. Covers certain passive income
17. Nathan sells hot chili-flavored pancakes using a b. Covers all capital gains
secret formula he patented. He sued a competing c. Withholding at source
pancake house for alleged patent infringement and d. None of these
claimed a total indemnity of P1,200,000:
 P1,000,000 for loss of profits from loss of sales 2. Which of the following properties when classified as a
 P200,000 as Attorney's fee reimbursement capital asset is subject to capital gains tax?
If Nathan wins the case and is awarded the total a. Domestic stocks sold directly to buyer no niti na T b
indemnity, compute his total return of capital. a. b. Real property
P1,000,000 c. Both a or b
b. P800,000 d. None of these
c. P200,000
d. P0 3. Capital asset means
a. real properties used in business.
18. Johnson was one of the passengers of a van that fell b. personal properties used in business.
off a ravine. Henson sued the bus company and was c. real properties not used in business.
awarded an indemnity of P800,000 for the following: d. any property, real or personal, not used in business.
 P500,000 for the impairment of his health
resulting to the amputation of his legs 4. Which is not an item of passive income?
 P200,000 for his loss of salaries during his a. Royalties
hospitalization b. Prizes
c. Deposit interest income
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d. Professional income 12. Statement 1: The excess of mortgage assumed by the
buyer over the basis of the properties sold is the
5. These are accounting techniques or conventions used amount of the gain on the sale.
to measure income Statement 2: Any collection from an installment
a. Accounting methods contract where the mortgage exceeds the tax basis of
b. Accrual basis the properties received constitutes collection of income.
c. Accounting periods Which statement is true?
d. Cash basis a. Statement 1 only
b. Statement 2 only
6. These are distinct and equal time periods over which c. Both statements are true.
income is measured d. Neither statement is true.
a. Accounting methods
b. Accounting periods bord. 13. Which is correct regarding the crop year method?
c. Cash basis a. Crop year method is an accounting period.
d. Crop year basis b. Crop year method recognizes farming income when
the next planting season commenced.
7. Income is recognized when received rather than c. Crop year method matches cropping expenses with
when earned the income upon harvest.
a. Cash basis d. Crop year method recognizes cropping expenses
b. Installment basis when incurred.
c. Accrual basis
d. Deferred payment basis 14. Which is not a special feature of regular income
taxation?
8. Income is recognized when earned regardless of a. Use of accounting methods
when received c. Annual payment of income tax
a. Cash basis b. Use of accounting periods
b. Accrual basis d. Final withholding tax at source
c. Installment method
d. Percentage of completions 15. Which is an incorrect statement regarding the use of
accounting period?
9. Initial payment means a. Individuals can either choose the calendar year or
a. Down payment. fiscal period.
b. Total collection within the year the installment sale b. The regular accounting period for any taxpayer is 12
was made. months.
c. Installment payments, exclusive of downpayment, c. Individual taxpayers are not allowed to report income
within the year using the fiscal accounting period.
d. Total collections within one year from the date the d. Corporations may opt to use either calendar or fiscal
installment sale was made accounting period.

10. Income is reported by reference to the extent of 16. Under which of the following will a short accounting
project completion in period not arise?
a. Deferred payment method a. Change of accounting period by a corporate taxpayer
b. Installment method b. Change of accounting period by an individual
c. Percentage of completion method taxpayer
d. Completed contract method c. Death of a taxpayer
d. Dissolution and liquidation of a business
11. Leasehold income is recognized over the lease term
in 17. A corporation reporting on a fiscal year ending
a. Outright method every March 31 shall file its 2021 income tax return not
b. Cash basis later than a. April 15, 2021.
c. Spread-out method b. June 15, 2021.
d. Percentage of completion method c. July 15, 2021.
d. April 15, 2022.

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18. An individual income taxpayer shall file his or her d. Final income tax applies to all passive income from
income tax return on or before the Philippines sources.
a. 15th day of the fourth month of the same calendar
year. 4. Interest income from which of the following sources
b. 15th day of the fourth month of the following is subject to final income tax?
calendar year. a. Lending
C. 15th day of the fourth month of the same fiscal year. b. Mortgage loans
d. 15th day of the fourth month of the following fiscal c. Investment in corporate bonds
year. d. Money market placements

19. Anderson died on March 31, 2021. Which is a 5. The final tax does not apply to interest on (select the
correct statement? best answer)
a. Anderson's 2021 income tax return shall cover a. Long-term deposit
January 1, 2020 to December 31, 2021. b. Trust funds
b. Anderson's 2021 income tax return shall cover c. Deposit substitute
January 1, 2021 to December 31, 2021. d. Promissory notes
c. Anderson's 2021 income tax return shall cover
January 1, 2021 to March 31, 2021. 6. Prizes from sources abroad is subject to final tax
d. Anderson's 2021 income tax return shall cover April a. if the amount of prizes exceeds P10,000.
1, 2021 to December 31, 2021. b. if the amount of prizes does not exceed P10,000.
c. if it is given to the taxpayer without effort.
20. Mrs. Julian started business on July 15, 2021. What d. under no circumstance.
should be the coverage of her 2021 income tax return?
a. January 1 to July 15, 2021 7. Which is covered by final tax?
b. July 15, 2021 to December 31, 2021 a. Interest income from foreign banks
c. July 16, 2021 to July 15, 2021 b. Share in the net income of a joint venture
d. January 1 to December 31, 2021 c. P10,000 taxable prizes from the Philippines
d. Share in the net income of a general professional
partnership
CHAPTER 5. FINAL INCOME TAXATION
8. Which is not subject to 20% final tax?
1. The final tax rates on pre-termination of long-term a. Interest income from trust funds o
deposits are not relevant to b. Royalties from musical compositions
a. any corporations. c. P11,000 worth of prizes
b. resident aliens. d. Winnings
c. resident citizens.
d. non-resident citizens. 9. Which is not subject to 10% final tax?
a. Royalties from literary works
2. Which is correct with regard to the final income b. Dividends from a domestic corporation
taxation? c. Share in the net income of a business partnership
a. It covers all items of passive income from whatever d. Royalties from a business trademark
sources.
a. Taxpayers need not file an income tax return. 10. Which of the following is taxable?
c. It applies to all items of gross income of any non- a. Prize on sports competitions sanctioned by the
resident earned from sources within the Philippines. national sports organization
d. It applies to passive income earned abroad. b. Prize from dance competition abroad
c. Nobel prize
3. Which statement is correct regarding final income d. Any prize received without effort
tax?
a. Items of income subjected to final tax can still be 11. Which winning is taxable to a final tax?
subjected to regular tax. a. Winnings exceeding P10,000
b. Final tax applies only on certain passive income b. Winnings from PCSO lotto
earned within the Philippines. c. Winnings not exceeding P10,000
c. Items of income exempt under final tax are subject to d. All of these
regular tax.
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12. Winnie, a resident citizen, deposited P2,000,000 in c. P1,000,000
the 180-day time deposit of Banco de Oro. The deposit d. P900,000 views 19
pays 8% interest. Compute the final tax on maturity of
the deposit. 18. A concerned government employee furnished the
a. P6,000 BIR a statement detailing the improper tax practices of
b. P8,000 a corporate taxpayer. The information was instrumental
c. P20,000 to the collection of P500,000 tax. How much informer's
d. P16,000 tax reward after tax shall be released to the informant?
a. P0
13. Assume that Winnie is a non-resident alien not b. P40,000
engaged in trade or business; compute the final tax on c. P45,000
maturity of the deposit. d. P50,000
a. P6,000
b. P8,000 19. An individual taxpayer invested P1,000,000 in the
c. P20,000 "tax-free" corporate bonds of RBC Corporation. The
d. P16,000 bond pays 8.75% interest annually net of any taxes.
How much final tax must RBC Corporation withhold
14. Midsayap Inc. is the only corporate shareholder of from the annual interest payment to Roy?
Midsayap Inc. owning 60% of its outstanding voting a. P36,000
shares. During the year, Midsayap Inc. declared a b. P16,800
P1,000,000 dividend. Compute the final income tax to c. P37,500
be withheld by Surigao. d. P0
a. P100,000
b. P60,000 20. A taxpayer wants to manually file his Monthly
c. P40,000 Remittance Return of Final Income Tax Withheld for the
d. P0 month of February 2021. What is the deadline for the
return?
15. Mr. Taiwan won an P800,000 prize in a national a. March 10, 2021
dancing competition. The organizer of the event b. February 14, 2021
declared that the P800,000 grand prize was "tax free." c. February 28, 2021
How much final tax must be remitted by the organizer d. April 15, 2021
to the BIR?
a. P 160,000
b. P 200,000 CHAPTER 6. CAPITAL GAINS TAX
c. P88,889
d. P0 1. Which is subject to the 15% capital gains tax?
a. Sale of domestic stocks directly to a buyer within or
16. Mr. Crocodile Park owns a mining property in outside the Philippines
Prosperidad. He allowed a mining company to operate b. Sale of domestic bonds directly to a buyer within the
under a condition that he will be paid 10% royalty on Philippines
the gold production. The mining company produced c. Sale of domestic stocks through the Philippine Stock
P8,000,000 worth of gold during the year. How much Exchange and Wal?
net royalties will be paid to Mr. Crocodile? d. All of the above
a. P800,000
b. P640,000 2.bWhich is an ordinary asset?
c. P720,000 a. Personal car
d. P160,000 b. Delivery truck
c. Principal residence of the taxpayer
17. Mr. Carandang submitted a sworn statement d. Wedding ring of the taxpayer
regarding the alleged tax practices of Cutie Corporation.
This led the BIR to recover P20,000,000 unpaid taxes. 3. Which is not an ordinary asset?
How much net tax informer's reward shall be paid to a. Personal laptop of the taxpayer
Mr. Carandang? b. Real property held for sale
a. P1,800,000 c. Machineries and equipment.
b. P1,600,000 d. Leasehold improvements
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 b. Auction sale
4. Which is a capital asset to a realty developer?
a. Construction equipment c. Expropriation by the government
b. Vacant lot held for future development d. Any of these
c. Domestic stocks
d. Head office building of the developer 13. Mr. Dondi sold domestic stocks directly to a buyer at
a mark-up on cost of P200,000. He paid P5,000 broker's
5. Which is an ordinary asset? commission and P8,000 documentary stamp tax on the
a. Home appliances sale. Compute the capital gains tax.
b. Personal car a. P 28,050
c. Personal cell phone b. P 14,500
d. Office supplies c. P 14,200
d. P 13,700
6. Which of the following assets, if not used in business,
is subject to regular tax? 14. Mr. Abdul, a non-resident alien, sold domestic stocks
a. Real property directly to a buyer at a net gain of P 70,000. Compute
b. Domestic stock option the capital gains tax.
c. Domestic stock rights a. P 10,500
d. Taxpayer’s Personal Care b. P 6,000
c. P 4,000
7. Which is a capital asset for a security dealer? d. P 3,500
a. Domestic stocks
b. Domestic bonds 15. Mr. Panay Cabig, a non-resident citizen, sold
c. Real property held for speculation domestic stock rights directly to a buyer at a net gain of
d. Office equipment P 320,000. Compute the capital gains tax.
a. P30,000
8. Which of the following sales of domestic stocks is b. P25,000
subject to capital gains tax? c. P27,000
a. Sale of domestic stocks through the PSE d. P 48,000
b. Issue of domestic stocks to subscribers
c. Sale of domestic stocks directly to a buyer
d. Exchange of stocks for stocks in a corporate merger

9. Which of the following properties, when sold, may be

covered by regular income tax?
a. Share options
b. Preferred stocks
c. Share warrants
d. Promissory notes

10. Which of the following assets may be subject to

capital gains tax upon disposal?
a. Parking lot
b. Farm
c. Dormitory
d. Office supplies

11. The sale of an office building will be subject to

a. 60% of 1% percentage tax.
b. 15% capital gains tax.
c. regular tax
d. 6% capital gains tax.

12. The term "other disposition" covers

a. Foreclosure sales
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