TAXATION CPA Review School of the Philippines Pre-week Quizzer

Basic Principles of Taxation 5. Which of the following statements is wrong?

1. The President of the Philippines and the Prime Minister of Japan entered into executive A. A tax certificate validly issued by the Bureau of Internal Revenue may be used as credit
agreement in respect of a loan facility to the Philippines from Japan whereby it was stipulated against any internal revenue tax
that interest on loans granted by private Japanese financial institutions to private financial B. All public officials who acquire information on violation on internal revenue laws in the
institutions in the Philippines should not be subject to Philippine income taxes. Is the tax performance of their duties during their incumbency are prohibited from claiming
exemption valid? informer’s reward:
A. Yes, non-taxability of the government C. All taxes collected by the Bureau of Internal Revenue are national internal revenue taxes
B. Yes, based on international comity D. Any person who violates any provision of the National Internal Revenue Code, or any
C. Yes, based on international treaties and agreement revenue regulation, for which no specific penalty is provided by law, shall upon conviction
D. No, violation of the essential characteristics of taxation and for each offense or omission, be punished by a fine of not more than one thousand
pesos or suffer imprisonment of not more than six months, or both.
2. The Secretary of Finance, upon accommodation of the Commissioner of Internal Revenue,
issued a Revenue Regulation using gross income as the tax base for corporations doing Compliance Requirements
business in the Philippines. Is the Revenue Regulation valid? 6. 1st Statement: Tax return filed by individual with pure compensation income only on or before
A. Yes, the Secretary of Finance has the power to issue Revenue Rules and Regulations April 15.
B. Yes, gross income taxation over corporation is valid 2nd Statement: Tax returns filed by individuals deriving income from self-employed or
C. No, the Secretary of Finance has no power to amend the NIRC corporation monthly
D. No, only the commissioner of BIR has the authority to make revenue rules and regulation A. B. C. D.
Statement 1 True True False False
3. In a loan agreement between the Bangko Sentral ng Pilipinas (as borrower) and private Statement 2 True False True False
international banks (as lender), it is stipulated that all payments of interests by the Central
Bank to the lenders shall be made free and clear from all Philippines taxes, which may be 7. 1st Statement: Final adjustment return of self-employed individual or corporation using
imposed thereon, is the stipulation valid? calendar year on or before December 31
A. Yes, based on international comity 2nd Statement: Returns for each sale or exchange on stock not listed or traded through a local
B. Yes, non-taxability of the government exchange within 30 days after each transaction
C. No, violative of the inherent limitations A. B. C. D.
D. No, violative of the constitutional limitation
Statement 1 True True False False
Statement 2 True False True False
4. Statement 1: The power of the Commissioner of Internal Revenue to recommend the
promulgation of rules and regulations by the Secretary of Finance may not be delegated.
Statement 2: The power of the Commissioner of Internal Revenue to issue rulings of first 8. 1st Statement: Final consolidated returns for sale or exchange of stock not listed or traded
impression or to reverse, revoke or modify any existing ruling of the Bureau of Internal through a local exchange on or before April 15
Revenue may be delegated 2nd Statement: Estate tax returns from decedent’s death within 30 days
A. B. C. D. A. B. C. D.
Statement 1 True True False False Statement 1 True True False False
Statement 2 True False True False Statement 2 True False True False

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TAXATION CPA Review School of the Philippines Pre-week Quizzer

Income Tax Patterns 13. Mr. and Mrs. Tristan Robles, citizen and residents of the Philippines, with two qualified
9. Are moral damages awarded a litigant for mental anguish on account of a libelous article dependent children, had the following data in 1998:
written about him taxable as income or not? Gross compensation income (net of SSS, Medicare, and Pag-ibig)
A. Yes, moral damages are taxable income contributions, and of labor union dues, but before withholding
B. Yes, since it is not arising from physical injuries income tax), Mrs. Robles P80, 420
C. No, there is no loss profit Gross income from profession, Mrs. Robles 258,730
D. Answer not given Gain on sale of capital asset held for 6 months, Mrs. Robles 15,000
Prize won in an essay contest, Mrs. Robles 2,000
10. Patroclus was injured in a vehicular accident in 2000. He incurred and paid medical expenses Expense in the practice of profession 135,000
of P10,000 and legal fees of P5,000 during that year. In 2003, he recovered P35,000 as Income tax withheld on the professional fees 25,873
settlement from the insurance company which insured the car owned by the other party Taxable income of Mrs. Robles
involved in the accident. From the above payments and transactions, the amount taxable to A. 63,420 C. 49,420
Patroclus in 2003 is: B. 47,420 D. 65,420
A. P20,000 C. P35,000
B. P25,000 D. None of the above. 14. Calendar year is 2000:
Capital gain on sale of bonds held for 20 months P50,000
11. An accident solely attributed to the criminal negligence of the driver of B Bus Company Capital gain on sale directly to buyer of shares of
resulted in the death of X’s wife, physical injuries to X that prevented him from working for a domestic corporation for 6 months P120,000
month, and the total wreck of X’s brand new car which he had bought for P400,000. Capital loss on sale of family car held for 11 months P40,000
In the action for damages filed by X against B Bus Company, the Court awarded the following: Capital loss on sale of land in the Phils.
P30,000 for X’s injuries consisting mainly in the loss of his right hand: P25,000 for X’s loss of a held for 3 years with a SP P800,000 P60,000
one month salary, P25,000 for the death of his wife and P100,000 moral damages on account Net capital loss in 1999 (net taxable income of the year was 10,000) P5,000
of such loss and P800,000 for the loss of X’s car, the value of which had in the meantime Compute the total net capital gain or loss:
doubled on account of inflation. A. P25,000 C. (P20,000)
How much is the taxable income? B. 0 D. (P15,000)
A. 25,000 C. 525,000
B. 425,000 D. 125,000 15. Sale of shares of stock of a domestic corporation held as capital asset:
Thru a local stock exchange:
12. Born of a poor family on 14 February 1948, Mario worked his way through college. After Sale 1: SP of P300,000 and cost of P280,000;
working for more than 12 years in X Manufacturing Corporation, Mario decided to retire and Sale 2: SP of P600,000 and cost of P700,000
avail of the benefits under the very reasonable retirement plan maintained by his employer. Directly to buyers:
On the day of his retirement on 30 April 1998, his endowment insurance policy, for which he Sale 3: SP of P300,000 and cost of P110,000
was paying an annual premium of P1,520.00 since 1978 also matured. He was then paid the Sale 4: SP of P250,000 and cost of P200,000
face value of his insurance policy in the amount of P50,000.00. How much proceeds is Sale 5: SP of P320,000 and cost of P350,000
taxable income of Mario? Total of capital gain taxes on a per transaction basis:
A. 19,600 C. 50,000 A. P33,000 C. P24,000
B. 31,760 D. 18,240 B. P32,000 D. P16,500

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TAXATION CPA Review School of the Philippines Pre-week Quizzer

16. A took out a life insurance policy for P100,000, OO naming his wife as beneficiary. Under the 19. Taxable income
terms of the policy, the insurer will pay A the amount of P100,000.00 after the 20 th year of the A. 85,000 C. 383,000
policy, and his beneficiaries, should he die before that date. A outlived the policy and received B. 220,000 D. 613,000
P100,000.00. The premiums paid on the policy was P85,000.00. How much is the taxable
income? Questions 20 thru 22 are based on the following information.
A. 100,000 C. 15,000 The following data pertain to Mr. and Mrs. Ramon Santos, resident citizens of the Philippines, with
B. 85,000 D. 0 six qualified dependent children, with gross income and allowable deductions from conjugal
properties of P400,000 and P200,000, respectively in 1999, and the following additional data for
Questions 17 thru 19 are based on the following information. the year:
The following condensed data were taken form the quarterly Income Statements of Blanco, Inc., a Mr. Mrs.
domestic corporation, with a fiscal year ending June 30, 1999 as the taxable year: Gross income from:
1st Q 2nd Q. 3rd Q 4th Q Business P549,460
Sales P600,000 P400,000 P700,000 P600,000 Profession P462,490
Inventory, beginning of the year 50,000 Interest income from:
Purchase 350,000 180,000 320,000 220,000 Philippine currency bank 20,000
Inventory, end of quarter 0 60,000 40,000 70,000 Trade notes payable 10,000
Dividends form: Long-term investment on bank 50,000
Domestic corporations 10,000 10,000 Dividend income from:
Resident corporations 5,000 5,000 Domestic corporation 30,000
Interest on Philippine currency Resident foreign corporation 35,000
bank time deposit 1,000 1,000 1,000 1,000 Capital gain on sale of shares of stocks of domestic
Capital gain on: corporations:
Sale directly to a buyer of shares Sold directly to a buyer at a selling price of P620,000 125,000
of a domestic corporation 190,000 190,000 Sold thru the Philippine Stocks Exchange 100,000
Sale of land and building at a Capital gain on sale of land in the Philippines at a
selling price of P6,000,000 900,000 selling price of P4,000,000 when the fair market value
Selling expenses 100,000 120,000 180,000 150,000 was P3,600,000 200,000
General and administrative Expenses 248,000
expenses 20,000 25,000 22,000 30,000
20. Final income tax on passive income
17. Final income tax on passive income. A. 16,400 C. 7,000
A. 800 C. 6,000 B. 17,000 D. 6,400
B. 200 D. 1,200
21. Capital gain tax
18. Capital gains tax A. 240,000 C. 57,000
A. 360,000 C. 374,000 B. 247,500 D. 257,500
B. 393,000 D. 256,000

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TAXATION CPA Review School of the Philippines Pre-week Quizzer

22. Taxable income of Mrs. Santos 28. Which statement is correct? The value-added tax on an importation:
A. 308,710 C. 276,710 A. Should be paid by the tax-importer, if he subsequently sells the goods to a non-tax-
B. 292,710 D. 240,710 exempt purchases
B. Should be paid by a non-tax-exempt purchases or whom the tax exempt importer sells it
Gross Income C. Is a liability either of the exempt importer or the non-tax-exempt purchaser
23. Linus purchased a life annuity for P100,000.00 which will pay him P10,000.00 a year. The life D. Shall not pay the value-added tax because the transaction was exempt at the point of
expectancy of Linus is 12 years. Under the National Internal Revenue Code, which of the importation
following will Linus are able to exclude from his gross income?
A. 20,000 C. 120,000 29. Which statement is not correct?
B. 100,000 D. 0 A. The excess input taxes of a taxable month arising from domestic sales may be carried
over to the succeeding month
Value-added Tax B. The excess input taxes of a taxable quarter arising from domestic sales may be carried
24. Input value-added tax attributed to the purchase of capital goods may: over to the succeeding quarter
A. If resulting in excess input taxes, be carried over to a next taxable period C. The excess input taxes of a taxable period arising from domestic sales may be refunded
B. Be refundable. D. The excess input taxes of a taxable period arising from export sale may be refunded
C. Be credited against other internal revenue taxes of the taxpayer.
D. Any of the above. 30. Statement No 1: Withholding value-added tax is required at 30% of the gross payment for the
purchase of goods by the Government or any of its political subdivision or by a government
25. Which statement wrong? On goods exported by a VAT-registered person: owned or controlled corporation
A. The excise tax is not imposed. Statement No.2: Withholding value-added tax is required at 6% on every lease or installment payment
B. The value-added tax is sot imposed. on purchase of services by the Government or any of its political subdivision, or by a government-owned
C. The input taxes attributable to the goods exported may be credited against other internal or controlled corporation.
revenue taxes due from the taxpayer. A. B. C. D.
D. The input taxes attributable to the goods exported may be claimed as a refund by the Statement 1 True True False False
taxpayer Statement 2 True False True False

26. Which statement is wrong? Value-added tax on importation of goods: 31. The following data pertain to a value-added taxpayer whose purchases were all from value-
A. Is imposed on an importation for sale or for use in business. added taxpayers:
B. Is imposed on an importation for personal use. Output taxes, January P 110,000
C. Should be paid prior to removal from customs custody. Input taxes, January 200,000
D. May not be available as input tax. Output taxes, February 290,000
Input taxes, February 120,000
27. Excess input tax carry-over can be done in: Excess input taxes carried over from January 90,000
A. The monthly VAT return but not in the quarterly VAT return Sales, total invoice price, March 3,000,000
B. The quarterly VAT return but not in the monthly VAT return Purchases, total invoice cost, March 1,430,000
C. Both in the monthly VAT return and quarterly VAT return The value-added tax payable for March is:
D. Either only the monthly or the quarterly VAT return. A. P250.000 C. P177,000
B. P160,000 D. P87,000
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Other Percentage Taxes 37. The distinction between actual distraint and constructive distraint is that:
32. Which statement is wrong? A. Actual distraint may be made in the property of any taxpayer whether delinquent or not
A. The percentage taxes are basically on sales of services while constructive distraint is made on the property only of a delinquent taxpayer
B. The percentage taxes are paid quarterly B. In actual distraint, there is a taking of possession, while in constructive distraint; the
C. The percentage taxes are not allowed by law to be shifted to the customers or clients taxpayer is merely prohibited from disposing of the property
D. An isolated transaction not in the course of business will not result in a liability for a C. Actual distraint is affected by requiring the taxpayer to sign a receipt of the property or by
percentage tax the revenue officer preparing and leaving a list of the distrained property or by service of a
warrant of distraint or garnishment
Remedies of the State and the Taxpayer D. Answer not given
33. Statement 1: 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 38. Where a return was filed, as a general rule, the prescriptive period for assessment after the
Internal Revenue, subject to review by the Secretary of Finance date the return was due or was filed, whichever is later, is within
Statement 2: The power to decide disputed assessment and refunds of internal revenue taxes A. Three years C. Ten years
is vested in the Commissioner of Internal Revenue, subject to the exclusive appellate B. Five years D. Answer not given
jurisdiction of the Secretary of Finance
A. B. C. D. 39. Where any national internal revenue tax is alleged to have been erroneously or illegally
Statement 1 True True False False collected the taxpayer should first:
Statement 2 True False True False A. File a claim for refund or credit
B. File an action for refund with the Regional Trial Court
34. The following are administrative remedies available to a taxpayer in connection with collection C. File an action for refund with the Court of Tax Appeals
of taxes, except one D. Answer not given
A. Filing of claim for refund or credit
B. Filing a petition for reconsideration or reinvestigation 40. Which of the following statements is not true?
C. Filing of criminal complaint against erring BIR officials or employees A. If a taxpayer is acquitted in a criminal violation of the Tax Codes, this acquittal does not
D. Entering into a compromise exonerate him from his civil liability to pay the taxes
B. A conviction for tax evasion is not a bar for collection of unpaid taxes
35. Which of the following cases falls within the jurisdiction of the Court of Tax Appeals? Except: C. A tax assessment is necessary criminal prosecution for willful attempt to defeat and evade
A. Criminal action for violation of the NIRC payment of taxes
B. Question of whether or not to impose a deficiency tax assessment upon a taxpayer D. Criminal proceeding under the Tax Code is now a mode of collection of interval revenue
C. Appeal from undisputed tax assessment taxes, fees or charges.
D. Action for refund of real property tax
41. What are the liabilities for failure to withhold a tax? Except
36. Which is the correct answer? The following additions to the delinquency tax are called “civil A. Liable upon conviction to a penalty equal to the total amount of the tax not withheld, or not
penalties” accounted for and remitted
A. Deficiency interest C. Interest on extend payment B. Punished by a fine not less than P30,000 but not more than P100,000 or suffer
B. Delinquency interest D. All of the above imprisonment of not less than 2 years but not more than 4 years
C. Shall be open to civil suits for collection of taxes
D. Shall not be allowed deduction on such item
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42. An internal revenue officer, having been reliably informed from unimpeachable source, that
articles subject to excise taxes were kept in the house of Y, entered said house to look for and
to seize the aforementioned articles over the objection of Y. Since said officer was not armed
with a search warrant, Y involved the sanctity of his home. Is the internal revenue officer’s
actuation described above, sanctioned by law or not?
A. Yes, because of the lifeblood theory
B. Yes, IRO are exempted from obtaining search warrants
C. No, violative of search and seizure clause of the constitution
D. No, against right to privacy
46. Which statement is wrong?
A. Stocks and securities shall be distrained by serving a copy of the warrant of distraint upon
the taxpayer and upon the president, manager, treasurer or other responsible officer of the
corporation, company or association which issued said stocks or securities;
B. Debts and credits shall be distrained by leaving with the person owing the debts or having
in his possession or control such credits a copy of the warrant of distraint
C. Bank accounts are garnished by serving a warrant of garnishment upon the taxpayer and
upon the president, manager, treasurer or other responsible officer of the bank
D. None of the above

43. A store in the Cartimar market in Pasay City was discovered by the BIR agents selling luxury 47. Statement 1. A refund check or warrant which shall remain unclaimed or uncashed within 10
items worth about P500,000.00 suspected to have been smuggled into the country by the years from the date the said warrant or check was mailed or delivered shall be forfeited in
storeowner. May the Commissioner of Internal Revenue put under “preventive embargo” said favor of the Government
luxury items? Statement 2. A tax credit certificate, which shall remain unutilized after five years from the
A. Yes, it is like constructive distraint date of issue shall, unless revalidated, be considered invalid, and shall not be allowed as
B. Yes, because of anti-smuggling law payment of any internal revenue tax liabilities of the taxpayer
C. No, violative of search and severe clause of constitution A. B. C. D.
D No, violative of due process clause of the constitution Statement 1 True True False False
Statement 2 True False True False
44. Which statement is correct? In case a tax erroneously collected
A. A case for refund may be filed with the court simultaneously with a filing of a claim for 48. The period for collection of any tax by summary or juridical proceedings is suspended
refund with the Bureau of Internal Revenue A. If the taxpayer requests for a reinvestigation, which is granted by the Bureau of Internal
B. A case of refund may be filed with the court even without filing a claim for refund with the Revenue
Bureau of Internal Revenue B. If the taxpayer cannot be located in the address given by him in the tax return filed
C. A claim for refund must first be filed with the BIR and a decision of the Bureau must, under C. When the taxpayer is out of the Philippines
any circumstance, be awaited before a case for refund may be filed, with the court D. Any of the above
D. A claim for refund must first be filed with the BIR, in a given situation, a case for refund
may be filed with the court without awaiting the decision of the Bureau 49. Statement 1. A tax lien attaches to all the property and property rights of a taxpayer only from
the time when the collection was made by the Bureau of Internal Revenue for the unpaid tax,
45. What constitutes prima facie evidence of a false or fraudulent return? with interests, penalties and costs.
A. A substantial under declaration of taxable sales, income or receipts as determined by the Statement 2. A tax lien shall not be valid against any mortgagee purchaser or judgment
BIR commissioner creditor until notice of such lien shall be filed in the office of the Register of Deeds of the
B. Failure to report sales in an amount exceeding 30% of that declared per tax return province or city where the property is situated or located.
constitutes substantial under declaration of sales A. B. C. D.
C. A claim of deduction in an amount exceeding 30% of actual deduction constitutes
Statement 1 True True False False
overstatement of deductions
Statement 2 True False True False
D. All of the above

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50. Apple Computer Corp. (ACC) is a foreign corporation doing business in the Philippines through Answer Key
a local branch located at Makati, Metro Manila. In 1998, the local branch applied with the 1. D 11. B 21. B 31. A 41. B
Central Bank for authority to remit to ACC branch profits amounting to P8,000,000.00. After 2. C 12. A 22. A 32. D 42. A
paying the 15% branch remittance tax of P1,200,000.00 the branch office remitted to ACC the 3. B 13. A 23. B 33. B 43. A
balance of P6,800,000.00. In January 1999, the branch office was advised by its legal counsel 4. B 14. D 24. D 34. C 44. D
that it overpaid the branch remittance tax since the basis of the computation thereof should be 5. A 15. D 25. B 35. B 45. D
the amount actually remitted and not the amount applied for. Accordingly, the branch office 6. B 16. C 26. D 36. D 46. D
applied for a refund in the amount of P180,000.00. How much is the refund? 7. C 17. A 27. C 37. B 47. C
A. 180,000 C. 15% of net income of branch 8. B 18. B 28. B 38. A 48. D
B. 120,000 D. None
9. C 19. D 29. C 39. A 49. C
10. D 20. D 30. C 40. C 50. A

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