Theories - Compre

Question 1

The following are secondary purposes of the power of taxation, except:

a. Regulation;
b. Reduction of social inequity;
c. Encourage economic growth;
d. Raise revenue for the Government.

Answer 1

d. Raise revenue for the Government.

Primary purpose of the power of taxation

Question 2

Which of the following statements is true?

a. The power of taxation and eminent domain are both exercisable only by the government and its political subdivision.
b. In police power, the property taken is preserved for public use.
c. The power of eminent domain is created by the constitution.
d. The exercise of the power of eminent domain and police power can be expressly delegated to the local government units by the law making body.

Answer 2

d. The exercise of the power of eminent domain and police power can be expressly delegated to the local government units by the law making body

Question 3

A fundamental rule in taxation is that “the property of one country may not be taxed by another country”. This is known as

a. International law
b. Reciprocity
c. International comity

Answer 3

c. International comity

Question 4

All are similarities of taxation, police power, and power of eminent domain, except:

a. All are necessary attributes of the State
b. All exist independently of the Constitution
c. All contemplate an equivalent benefit
d. All are superior to the non-impairment limitation.

Answer 4

d. All are superior to the non-impairment limitation.

Question 5

In every case of doubt, tax statutes are construed:

a. Strictly against the government and the taxpayer.
b. Liberally in favor of the government and the taxpayer.
c. Strictly against the government and liberally in favor of the taxpayer.
d. Liberally in favor of the government and strictly against the taxpayer.

Answer 5

c. Strictly against the government and liberally in favor of the taxpayer.

Question 6

The following are the requisites of a taxpayer’s suit, except:

A. That public money, earned from taxes, are being spent on any improper purpose;
B. That the petitioner should assume the personality of a taxpayer to gain personality to file the suit;
C. That the petitioner must be a citizen of the Philippines;
D. That the petitioner seeks to restrain the respondent from wasting public funds.

Answer 6

C. That the petitioner must be a citizen of the Philippines;

Question 7

All of the following, except one, are sources of tax laws

a. Legislations, tax treaties and tax ordinances
b. Judicial decisions
c. Opinion of authors
d. Administrative rules and regulations

Answer 7

c. Opinion of authors

Question 8

Which of the following constitute objectionable double taxation?

a. A license fee and a tax imposed on the same business or occupation for selling the same object.
b. A tax imposed both on the occupation of fishing and on fishpond operation.
c. Persons engaged in leasing or selling real property are subject to real estate dealers tax and their sales are subject to the VAT.
d. A tax of 1% is imposed for bank reserve deficiency while a penalty of 1/10 of 1% is also imposed as a consequence of such reserve deficiency.

Answer 8

d. A tax of 1% is imposed for bank reserve deficiency while a penalty of 1/10 of 1% is also imposed as a consequence of such reserve deficiency.

Question 9

The following except one are basic principles of a sound tax system:

a. It should be capable of being effectively enforced.
b. Sources of revenue must be sufficient to meet government expenditures.
c. Persons similarly situated should be taxed similarly.
d. Taxes imposed should be based on the taxpayers ability to pay.

Answer 9

c. Persons similarly situated should be taxed similarly.

a. Administrative feasibility
b. Fiscal adequacy
d. Theoretical justice

Question 10

The following are to be determined by Congress in the exercise of its taxation power, except:

a. Scope of the tax;
b. Purpose of the tax;
c. Apportionment of the tax;
d. Implementing rules and regulations.

Answer 10

d. Implementing rules and regulations.

Question 11

Levying of local government taxes may be exercised by:

a. The local executive only
b. The legislative branch of the local government only
c. The local executive and the legislative branch of the local government unit
d. Neither the local executive nor the legislative branch of the local government can exercise the power

Answer 11

a. The local executive only

Question 12

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 sugar industry
d. None of the choices

Answer 12

d. None of the choices

Question 13

In every case of doubt, laws granting tax exemption shall be construed.

a. Strictly against the government and the taxpayer.
b. Liberally in favor of the government and the taxpayer.
c. Strictly against the government and liberally in favor of the taxpayer.
d. Liberally in favor of the government and strictly against the taxpayer.

Answer 13

d. Liberally in favor of the government and strictly against the taxpayer.

Question 14

A taxpayer gives the following reasons for refusing to pay a tax. Which of his reasons is not acceptable for legally refusing to pay the tax?

a. That he has been deprived of due process of law. b. That there is lack of territorial jurisdiction.
c. That the prescriptive period for the tax has lapsed.
d. That he will derive no benefit from the tax.

Answer 14

d. That he will derive no benefit from the tax.

Question 15

Which statement is wrong?

a. A tax is a demand of sovereignty.
b. A toll is a demand of ownership.
c. A special assessment is a tax.
d. Customs duty is a tax.

Answer 15

c. A special assessment is a tax.

Question 16

It refers to a fraudulent act of minimizing taxes

Tax avoidance
b. Tax minimization
c. Tax evasion
d. Multiple taxation

Answer 16

c. Tax evasion

Question 17

No law granting tax exemption shall be passed without the concurrence of:

a. Majority of all members of Congress.
b. 2/3 vote of all members of Congress.
c. 3⁄4 vote of all members of Congress.
d. Majority of all members of the Senate.

Answer 17

a. Majority of all members of Congress

Question 18

Which of the following has no power of taxation?

a. Provinces
b. Barangays
c. Cities
d. Barrios

Answer 18

d. Barrios

Question 19

One of the following is NOT an inherent limitation

a. Taxes must be for public purposes
b. Due process requirement.
c. Territoriality rule
d. Non-delegability rule

Answer 19

b. Due process requirement

Question 20

The following are the requisites of a validly imposed tax, except:

a. That the subject matter thereof be within the jurisdiction of the state;
b. That the assessment and collection thereof be subject to the due process guarantee of the constitution:
c. That the tax must not impinge on the inherent and constitutional limitations on the exercise of taxation power;
d. It should be generally payable in money.

Answer 20

d. It should be generally payable in money.

Question 21

A non-resident alien not engaged in trade or business sold shares of stocks of a domestic corporation not traded in the local stock exchange for P500,000. The shares of stock were originally purchased for P300,000. What is the tax implication of such transaction?

a. Exempt from income tax
b. Subject to P30,000 capital gains tax
c. Subject to P50,000 final withholding tax
d. Subject to 6% capital gains tax

Answer 21

b. Subject to P30,000 capital gains tax

(500k - 300k) x 15% = 30k

Question 22

Juan is a MIXED INCOME EARNER. He is a self-employed resident citizen and currently the Finance manager of Omega Corporation. The following data were provided for 2021 taxable year:

Compensation income - P1,800,000;
13th month pay and other benefits - 150,000;
Sales - 2,800,000;
Cost of sales - 1,125,000;
Business Expenses - 650,000;
Interest income from peso bank deposit - 80,000; Interest income from bank deposit under FCDS - 120,000;
Gain on sale of land in the Philippines held as capital asset with cost of P1,500,000 when the zonal value is P1,200,000 - 500,000;
Gain on sale of land in the Philippines held as capital asset with cost of P1,500,000 when the zonal value is P1,200,000 - 500,000;
Creditable withholding tax on compensation income - 448,000;
Creditable withholding tax on sale of goods - 28,000.

How much is Juan’s total income tax expense (Basic tax + FWT + CGT) assuming he opted to be taxed at 8%?

a. P321,500
b. P788,500
c. P826,000
d. P358,000

Answer 22

c. P826,000

Question 23

Johnson, an American national employed by an OGL, received the following on March 2022:

Basic salary - P120,000;
Annuities - 15,000;
Allowances - 8,000.

How much is the final withholding tax due?

a. P35,750
b. P30,000
c. P28,600
d. P0

Answer 23

a. P35,750

(120k + 15k + 8k) x 25% = 37.5k

Question 24

Ana received the following winnings in 2022. Which of the following is subject to final tax of 20%?

a. P10,000 winnings outside the Philippines
b. P1,000,000 Lotto winnings
c. P6,000 prize in a singing contest
d. P8,000 PCSO winnings

Answer 24

b. P1,000,000 Lotto winnings

Question 25

Persons with disability (PWDs) deriving returnable income during the taxable year, whether from compensation or otherwise, are a. Required to file their ITRs and pay the tax as they file the return. b. Exempt from compensation income taxes. c. Exempt from business taxes. d. Given a special tax at 15% of gross income

Answer 25

a. Required to file their ITRs and pay the tax as they file the return.

Question 26

A **non-resident alien not engaged in trade or business** sold shares of stocks of a domestic corporation not traded in the local stock exchange for P500,000. The shares of stock were originally purchased for P300,000. What is the tax implication of such transaction? a. Exempt from income tax b. Subject to P30,000 capital gains tax c. Subject to P50,000 final withholding tax d. Subject to 6% capital gains tax

Answer 26

b. Subject to P30,000 capital gains tax

Question 27

The gross income of alien individuals employed by POGO entities shall include: a. Basic salary or wages b. Annuities c. Compensation, remuneration and other emoluments, such as honoraria and allowances, received from OGLs and Service Providers d. All of the above

Answer 27

d. All of the above

Question 28

Which of the following fringe benefits will result to a debit of fringe benefit expense? a. Employer owns a residential property and the same is assigned for the use of his employee where the cost of the said property is equal or less than the amount used in determining monetary value. b. Employer owns a residential property and the same is assigned for the use of his employee where the cost of the said property is more than the amount used in determining monetary value. c. Employer purchases a residential property on installment basis and allows the employee to use the same. d. None of the choices

Answer 28

b. Employer owns a residential property and the same is assigned for the use of his employee where the cost of the said property is more than the amount used in determining monetary value.

Question 29

The gross income of foreign nationals or non-Filipino citizens employed by POGO Entities regardless of residency and who are employed and assigned in the Philippines, regardless of term and class of working or employment permit or visa, shall be subject to: a. Graduated tax rate under Section 24(A) of the Tax Code, as amended. b.Final withholding tax of 20% c. Final withholding tax of 25% d. Capital gains tax

Answer 29

c. Final withholding tax of 25%

Question 30

The basis or test of exemption of real properties owned by religious, or charitable entities from real property taxes is: a. Use of the real property b. Ownership of the real property c. Location of the real property d. Ownership or location real property at the option of the government

Answer 30

a. Use of the real property

Question 31

What is the correct treatment of overtime pay, holiday pay, night shift differential, and hazard pay received by those whose basic pay is **more than the statutory minimum wage**? a. Exempt from income tax. b. Subject to income tax, and consequently, to the withholding tax on compensation income. c. Considered as fringe benefit subject to fringe benefit tax, provided the employee is holding managerial or supervisory position. d. None of the above.

Answer 31

b. Subject to income tax, and consequently, to the withholding tax on compensation income.

Question 32

Mr. Mapalad, an executive of Mapagbigay Corporation was given a car by his employer. The cost of the car given to him was P900,000. Assuming the vehicle was purchased by the Company for Mr. Mapalad and the Company will shoulder only P550,000 of the value of the car. Mapagbigay Corporation's **allowable deduction** from gross income should be: a. P0 b. P550,000 c. P846,154 d. P900,000

Answer 32

c. P846,154 *550k/65% = 846,154*

Question 33

Mr. Mapalad, an executive of Mapagbigay Corporation was given a car by his employer. The cost of the car given to him was P900,000. Assuming the vehicle was purchased by the Company for Mr. Mapalad and and the Company will shoulder only P550,000 of the value of the car. The correct amount of fringe benefit tax that Mr. Mapalad is required remit to the BIR should be: a. P0 b. P192,500 c. P296,154 d. P325,000

Answer 33

a. P0 *The employer is the one required to remit to the BIR*

Question 34

Statement 1: Taxes are important because they are the lifeblood of the government and so should be calculated without unnecessary hindrance. Statement 2: The legislature, in adopting measures to implement our tax laws wants to be assured that taxes are paid and collected without delay.

Answer 34

Both statements are correct.

Question 35

Senior citizens deriving returnable income during the taxable year, whether from compensation or otherwise are a. Required to file their ITRs and pay the tax as they file the return. b. Exempt from compensation income taxes. c. Exempt from business taxes. d. Given a special tax at 15% of gross income.

Answer 35

a. Required to file their ITRs and pay the tax as they file the return.

Question 36

Statement 1: Gain on sale of all kinds of capital assets are subject to the final tax on capital gains. Statement 2: Gain from sale of real property classified as capital asset and located in Miami, Florida is not subject to capital gains tax.

Answer 36

Only the second statement is correct.

Question 37

Mr. Mapalad, an executive of Mapagbigay Corporation was given a car by his employer. The cost of the car given to him was P900,000. Assuming the vehicle was purchased by the Company for Mr. Mapalad and and the Company will shoulder only P550,000 of the value of the car. The monetary value of the benefit given to Mr. Mapalad is: a. P0 b. P550,000 c. P846,154 d. P900,000

Answer 37

b. P550,000 *MV = Amount shouldered by the employer*

Question 38

Mr. Mapalad, an executive of Mapagbigay Corporation was given a car by his employer. The cost of the car given to him was P900,000. Assuming the vehicle was purchased by the Company for Mr. Mapalad and and the Company will shoulder only P550,000 of the value of the car. How much is the correct amount of fringe benefit tax due? a. P0 b. P192,500 c. P296,154 d. P325,000

Answer 38

c. P296,154