COLEGIO DE DAGUPAN
Arellano Street, Dagupan City
School of Business and Accountancy
INCOME TAXATION
Midterm Examination
AY 2019-2020
A. Multiple Choice: Write the best answer in your test booklet. No erasures.
1. Which is an incorrect application of situs of taxation?
a. Persons are subject to tax at their place of residence.
b. Businesses are subject to tax where they conduct business.
c. Intangible properties are subject to tax where they are physically located.
d. Transfers are subject to tax depending on the residence, citizenship and location of the
property transferred.
2. Double taxation is regarded as highly objectionable. The following, except one, can mitigate
the impact of double taxation. Choose the exception.
a. Tax exemption of the income already subjected to income tax
b. Tax credit for taxpayers who already paid taxes to other tax jurisdictions
c. Reciprocity provisions between tax laws of taxing jurisdictions
d. Tax minimization schemes that would lessen the impact of levy.
3. A tax reform at any given time underscores the fact that:
a. Taxation is inherent power of the State.
b. Taxation is a very broad power of the State.
c. Essentially a legislative power.
d. The State can and should adopt progressive taxation.
4. Which is not a principle of sound tax system?
a. It should be capable of being effectively enforced.
b. Progressive tax should be levied.
c. Taxes must be sufficient to meet government expenditures and public needs.
d. It should be exercised to promote public welfare.
Prepared by: Marc Anthony Max P. Magbalon, CPA
5. Which statement is incorrect?
a. Special assessment is exceptional in operation.
b. The amount of toll is dependent upon the value of the property.
c. Special assessment is a tax.
d. Customs duty is a tax.
6. Based on the provisions of the tax code, the Constitutional guarantee of progressive
taxation is applied only to
a. Individual taxpayers
c. Both individuals and corporate taxpayers
b. Corporate taxpayers
d. Citizens of the Philippines
7. Which of the following cases constitute an objectionable double taxation?
a. A license fee and a tax imposed on the same business or occupation for selling the same
articles.
b. A tax imposed both on the occupation of fishing and fishpond operation
c. A person engaged in leasing or selling real property are subject to income tax on their
income and their sales are also subject to 12% VAT.
d. A tax of 1% is imposed for bank reserve deficiency while penalty of ½ of 1% a day is also
imposed as consequence of such reserve deficiency.
8. A person made several misrepresentations in securing a loan despite his clear inability to
repay the same. When he defaulted, the creditor filed for legal action. Can he be
imprisoned?
a. No. Non-payment of debt would not lead to imprisonment.
b. Yes. This is estafa, a criminal offense subject to imprisonment.
c. No. Non-payment of debt is a civil, rather than a criminal case.
d. Yes. One can be imprisoned for non-payment of tax.
9. Which of the following powers of the CIR can be delegated?
a. The power to recommend the promulgation of rules and regulation to the Secretary of
Finance
b. The power to issue rulings of first impression or to reverse, revoke or modify any
existing rulings of the Bureau.
c. The power to compromise or abate any tax liability.
d. The power to divide the Philippines into zones for purposes of enforcement of national
internal revenue taxes.
10. Which is correct regarding the chief officials of the Bureau of Internal Revenue?
Prepared by: Marc Anthony Max P. Magbalon, CPA
a. 1 Commissioner and 5 Deputy Commissioners
Commissioners
b. 4 Commissioners and 1 Deputy Commissioner
Commissioners
c. 1 Commissioner and 4 Deputy
d. 2 Commissioner and 8 Deputy
11. A resident citizen is taxable on all income derived from sources
a. Within the Philippines only
c. Partly within and partly without
b. Without the Philippines only
d. Within and without the Philippines
12. A non-resident citizen is taxable on all income derived from sources
a. Within the Philippines only
c. Partly within and partly without
b. Without the Philippines only
d. Within and without the Philippines
13. A citizen of the Philippines who works and derives income from abroad is a resident citizen
if he stayed outside the Philippines
a. for less than 180 days
c. for 183 days or more
b. for more than 180 days
d. for less than 183 days
14. A citizen of the Philippines who works and whose employment requires him to be physically
present abroad most of the time during the taxable year is
a. taxable on income within and without the Philippines
b. taxable on income from without the Philippines
c. exempt from income tax
d. taxable on income from within the Philippines
15. A citizen of a foreign country is considered a non-resident alien engaged in business in the
Philippines if he stayed inside the Philippines
a. for 183 days or more
c. for more than 180 days
b. for less than 183 days
d. for less than 180 days
16. Who is a non-resident alien not engaged in business in the Philippines?
a. An alien who comes to the Phil. for a definite purpose shall be claimed which in its
nature may be promptly accomplished
b. An alien who comes to the Phil. for a definite purpose which in its nature would require
an extended stay of more than 180 days
c. An alien who has acquired residence in the Phil
d. An alien who lives in the Phil with no definite intention as to his stay
Prepared by: Marc Anthony Max P. Magbalon, CPA
17. Mr. X insured himself for P1M. After several months he died when he was able to pay a
total amount of P100,000. His beneficiary, his brother received the P1M insurance
proceeds. Mr. Y on the other hand insured himself for P1M. After 20 years he survived the
insurance policy and received return on his premiums. He received P1M from the insurance
company although he was only able to pay P700,000.
The total income subject to tax is _______________?
a. P 300,000
c. P 1,200,000
b. P 1,300,000
d. None of the choices
18. A tax payer was a victim of a vehicular accident who filed a case against the offender. The
court awarded him the following;
a. Actual damages for expenses paid in the hospital
P 200,000
b. Attorney’s fee he paid to his lawyer
50,000
c. Actual damages for lost arm
250,000
d. Moral damages
100,000
e. Exemplary damages
100,000
f. Salaries for 6 months when the tax payer was in the Hospital, absent
from his job w/ a monthly salary of P 50,00
300,000
The total income subject to tax is _______________?
a. P 300,000
c. P 700,000
b. P 500,000
d. None of the choices
19. It is important to know the source of income for income tax purposes (i.e. from within and
without the Philippines) because:
a. Some individuals and corporate taxpayers are taxed on their worldwide income while
others are taxable only upon income from sources within the Philippines.
b. The Philippine imposes income tax only on income from sources within.
c. Some individual taxpayers are citizens while others are aliens.
d. Export sales are not subject to income tax.
20. “Global system of income taxation” means:
a. All types of income except those subject to final tax are aggregated to arrive at gross
income.
b. Separate graduated rates are imposed on different types of income.
c. Capital gains are excluded in determining gross income.
Prepared by: Marc Anthony Max P. Magbalon, CPA
d. Compensation income and business/professional income are taxed at different places in the
world.
21. Which is covered by gross income taxation?
a.
Resident alien
b.
Nonresident alien engaged in trade or business without reciprocity law.
c.
Nonresident alien not engaged in trade or business.
d.
Nonresident citizen
22. Which is not a characteristics of corporate income tax:
a.
Progressive tax
c. General tax
b.
Direct tax
d. National tax
23. Which is governed by gross income taxation.
a.
Domestic corporation
b.
Resident corporation
c.
Non-resident corporation
d.
Educational institutions
24. It is important to know the source of income for income tax purposes, i.e. from within or
without the Philippines because
A.
The Philippines imposes income tax on income from sources within and without of a
non-resident citizen.
B.
Some individual taxpayers are citizens while others are aliens.
C.
Separate graduated rates are imposed on different types of income.
D.
Some taxpayers are taxed on their worldwide income while others are taxable only
upon income from sources within the Phils.
25. The Department of Finance thru its officers entered into a contract with foreign investors
granting them exemption from all forms of taxes to encourage investments in the Phils. The
contract is
A.
Void, unless the President ratifies
B.
Void, because the power to grant tax exemption is vested in Congress.
C.
Valid, if the President has authorized the officers to enter into such contract.
D.
Valid, because the purpose is to promote public welfare.
26. The National Internal Revenue Code of 1988 is
A.
RA 9337
Prepared by: Marc Anthony Max P. Magbalon, CPA
B.
C.
D.
CA 466
RA 9504
RA 8424
27. The TRAIN Law is also known as
A.
RA 10693
B.
RA 10396
C.
RA 10963
D.
RA 10369
28. Which of the following statements is not correct?
A.
An individual citizens of the Philippines who is working and deriving income from
abroad as an overseas contract worker is taxable on income from sources within and without
the Philippines.
B.
A seaman who is a citizen of the Philippines and who receives compensation for services
rendered abroad as a member of the complement of vessel engaged exclusively in international
trade shall be treated as a resident citizen.
C.
A non- resident citizen who is not engaged in business in the Philippines is treated as
non-resident alien who is not engaged in business in the Philippines
D.
An alien individual, whether a resident or not of the Philippines, is taxable only on
income derived from sources in the Philippines
29. For income taxation purposes, the term “corporation” excludes one of the following:
A. Ordinary partnership
B. An incorporated business organization
C. General professional partnership
D. Business partnership
30. The Phil. Health Insurance Corporation, a government owned corporation is:
A. Exempt from the corporate income tax
B. Subject to the preferential corporate income tax for special corporations.
C. Subject to the basic corporate income tax.
D. Subject to final tax.
31. Public educational institutions, like the University of the Philippines is deemed by law:
A. subject to preferential corporate income tax for special corporations.
B. Subject to the basic corporate income tax
C. Subject to both the preferential income tax and the basic corporate income tax.
Prepared by: Marc Anthony Max P. Magbalon, CPA
D. Exempt from the corporate income tax.
32. Which is not correct? The following are exempt from the corporate income tax:
A. Philippine Charity Sweepstakes Office
C. Gov’t. owned or controlled corp.
B. Bureau of Internal Revenue
D. Social Security System
33. All of the following statements are correct, except one. Which is the exception?
A. The source of interest income is the country where the debtor resides
B. The source of dividend income is the country where the corporation was incorporated
C. Rents are considered derived from the country where the property is located
D. Income from personal services is considered derived from the country where the services
were rendered.
34. Which is not a creditable withholding income tax?
A. Expanded withholding income tax
B. Withholding income tax on passive income
C. Withholding income tax at source
D. Withholding income tax on compensation income
35. Which of the following statements is correct?
A. The power of taxation reaches even the citizens abroad and his income earned from
sources outside the Philippines
B. Priests and religious institutions are exempt from income and property taxes.
C. Separation benefits received by terminated employees resulting from a deadlock in their
collective bargaining agreement are exempt from income tax.
D. The value of a property received as a gift, or under a will or testament or through legal
succession is exempt from taxation.
36. If an individual performs services for a creditor who in consideration thereof cancels the
debt, the cancellation of indebtedness may amount to
A. A gift
C . A capital contribution
B. A donation inter-vivos
D. A payment of income
37. A tax which is BOTH under taxation and Police Power:
A. Compensatory Tax
C. National Tax
B. Regulatory Tax
D. General Tax
Prepared by: Marc Anthony Max P. Magbalon, CPA
38. In the absence of inherent and constitutional limitation, the power of tax is:
A. Comprehensive, unlimited and plenary
B. Unlimited and plenary
C. Broad and penal
D. Unlimited and political
39. All are similarities of taxation, police power, and power of eminent domain, EXCEPT:
A. All are necessary attributes of the Constitution
B. All exist independently of the Constitution
C. All contemplate and equivalent benefit
D. All are superior to the non-impairment clause of the Constitution
40. One of the following is NOT a source of our tax laws:
A. Administrative rulings and opinions
B. Judicial decisions
C. 1987 Constitution
D Expert Opinion on Taxation
41. 1st Statement To be exempt from taxation under the Constitution land & buildings must
be exclusively and actually used for religious, educational or charitable purpose, even if not
directly.
2nd Statement Exemptions of non-profit schools are only limited to revenue and assets
derived from strictly school operations.
A. True, True
C. False, True
B. False, False
D. True, False
42. 1st Statement A taxpayer’s tax exempt status justifies the non-keeping of books of
accounts & other accounting records.
2nd Statement Fiscal tax and regulatory tax are the same.
A. True, True
C. False, True
B. False, False
D. True, False
43. 1st statement- A revenue regulation without approval of Congress does not have the force
and effect of law.
2nd statement- Tax avoidance & Tax shifting are two of the most common methods of tax
escape.
A. True, True
c. False, True
Prepared by: Marc Anthony Max P. Magbalon, CPA
B. False, False
d. True, False
44. Taxable on income from all sources within and without the Phil.
A. Resident citizen
B. Non-resident citizen
C. Resident alien
D. Non-resident alien
45. Taxable only on income from sources within the Phil. except
A. Resident citizen
B. Non-resident citizen
C. Resident alien
D. Non-resident alien
46. A non-resident alien is deemed doing business in the Phil. If he
A. Is an individual whose residence is within the Phil.
B. Is an individual whose father or mother is an alien who is engaged
in business in the Phil.
C. Is an individual who is naturalized in accordance with law
D. Shall come to the Phil. And stay therein for an aggregate period of
more than 180 days during a calendar year.
47. Who is non-resident alien not engaged in business in the Phil.?
A. An alien who comes in the Phil. For a definite purpose which in its
nature may be promptly accomplished.
B. An alien who comes to the Phil. For definite purpose which in its
nature would require an extended stay of more than 180 days.
C. An alien who has required residence in the Phil.
D. An alien who lives in the Phil. With no definite intention as to
his stay
48. The following taxes are imposed by Congress in the, 1997 National
Internal Revenue Code, except:
A. Real Estate Tax
B. Donor's Tax
C. Value Added Tax
D. Income Tax
49. Which is not a source of tax law?
A. Judicial decisions
B. Local ordinances
C. Opinion of tax authors
D. BIR rulings
50. A citizen of the Phils. who works and derives income from abroad
is a resident if he stayed outside the Phils.
A. For less than 180 days
B. For more than 180 days
C. For 183 days or more
D. For less 183 days
Prepared by: Marc Anthony Max P. Magbalon, CPA
Prepared by: Marc Anthony Max P. Magbalon, CPA