BAR EXAMINATION QUESTIONS IN

TAXATION
JB DIMAAMPAO
1. Under RA 9010 the following will be subject
to EVAT starting January 1, 2003, except:
a. Professionals, actors, actresses, talent,
singers, etc.
b. Banks
and
non-bank
financial
intermediaries
c. Services performed as professional
athletes
d. Cabarets, night clubs and racetracks
2. Export of Marikina shoes is subject to:
a.
b.
c.
d.

12% VAT
0% VAT
Exempt
Specific Tax

3. Assessment is necessary in the following

cases, except:
a. before the preliminary investigation of a
fraudulent tax evasion case could
prosper
b. to fix the tax liability of a taxpayer
c. establish a case for judicial action
d. for issuance of warrant of distraint or
levy
4. The prescriptive period for collection of
taxes is:
a. 10 years from discovery of omission to
file return, falsity or fraud if there is no
assessment
b. 3 years from filing of return
c. 5 years from release of assessment
d. a and c are correct
5. Importation of automobiles is subject to:
a. Graduated Ad valorem tax of 2% to 60%

b.
c.
d.
e.

VAT of 12%
Specific tax
a and b
Exempt

6. The manufacture and importation of the

following for local consumption are subject
to excise tax, except:
a.
b.
c.
d.

alcohol products
tobacco products
cinematographic films
mineral products

7. Domestic sale of bagoong is:

a. exempt from VAT
b. subject to 12% VAT if gross annual sales
exceed P1.5M
c. subject to 0% VAT
d. subject to 3% percentage tax if exempt
from VAT
e. b and d are correct
8. The BIR commissioner may_________ payment
of internal revenue tax when it appears to
be unjustly or excessively assessed, or
that the administrative and collection
costs involved do not justify the collection
thereof.
a.
b.
c.
d.

compromise
abate
credit
refund

9. No credit/refund of taxes shall be allowed

unless the taxpayer:
a. Files a written claim for credit/refund
with the BIR within 2 years from payment
b. Pays the tax under protest
c. Appeals to the CTA
d. Amends his tax return

10. Assessment is:

a. A written notice of the tax due
b. Based on facts and not presumed
c. Demand for payment of the tax within a
prescribed period of time
d. All of the above
11. The following are required to keep books
of accounts, except:
a. Corporations and partnerships
b. Persons engaged in trade or business in
the Philippines
c. Persons who earn passive income
d. None of the above
12. Requirements in order that retirement
benefits may be exempt from income tax:
a. Must be paid to an employee who is at
least 50 years old and has served his
employer for at least 10 years
b. Exemption from taxation of retirement
benefit must be availed of only once
c. The benefit must be received under an
existing Collective Bargaining Agreement
d. a and b only
13. For purposes of the donors tax, the
following are considered strangers:
a. Brother or sister, whether whole or halfblood
b. Relatives by consanguinity in the
collateral line within the 4th civil degree
c. Relatives by affinity, except the spouse of
the donor
d. None of the above
14. The special deductions from the gross
estate are the following, except:
a. Judicial expenses in testate or intestate
proceedings
b. Standard deduction
c. Family home up to P1,000,000
1

d. Medical Expenses within one year from

the death of the decedent not exceeding
P500,000

19. The periodic decrease in the value of a

fixed asset due to wear and tear,
obsolescence or inadequacy
a.
b.
c.
d.

15. Funeral expenses that can be claimed as

deduction from the gross estate should
be:
a.
b.
c.
d.
16.

Actual amount incurred

Not exceeding P200,000
5% of the gross estate
The lowest of the above figures

The usual modes of avoiding

occurrence of double taxation are:

20.
Will his suit prosper?
the

a. Reciprocal exemption either by law or

treaty
b. Tax credit for foreign taxes paid
c. Deduction for foreign taxes paid
d. All of the above
17. Jose is a law-abiding citizen who pays his
real estate taxes promptly. Due to a series
of
typhoons
and
adverse
economic
conditions, an ordinance is passed by
Quezon City granting a 50% discount for
payment of unpaid real estate taxes for
the preceding year and the condonation of
all penalties on fines resulting from the
late payment.
Arguing that the ordinance rewards
delinquent taxpayers and discriminates
against prompt ones, Jose demands that
he be refunded an amount equivalent to
one-half of the real estate taxes he paid.
The municipal attorney rendered an
opinion that Jose cannot be reimbursed
because the ordinance did not provide for
such reimbursement.
Jose files suit to
declare the ordinance void on the ground
that it is a class legislation.

a. The suit will prosper because the

ordinance is discriminatory in character.
b. The suit will prosper because the
ordinance is not based on substantial
distinction.
c. The suit will not prosper because taxes
are the lifeblood of the government and
should be collected without unnecessary
hindrance.
d. The suit will not prosper because the
ordinance is based on substantial
distinction. Each set of taxes is a class
by itself and the law would be open to
attack only if all the taxpayers belonging
to one class were not treated alike.
e. None of the above
18. Which of the following statements are
true?
a. Resident Filipino citizens with income
from foreign sources only are allowed
personal and additional exemptions
b. Non-resident aliens not engaged in
trade/business in the Philippines are not
allowed any personal exemptions
c. Non-resident
aliens
engaged
in
trade/business in the Philippines are
allowed personal exemptions based on
reciprocity
d. All of the above

depletion
depreciation
capital loss
special loss

The following
compromised:

cases

may

not

be

a. Criminal tax fraud cases

b. Withholding tax cases
c. Delinquent accounts with duly approved
schedule of payments
d. All of the above
21. Citing Section 10, Article VIII of the 1987
Constitution which provides that salaries
of judges shall be fixed by law and that
during their continuance in office their
salary shall not be decreased, a judge of a
Regional Trial
Court
questioned
the
deduction of withholding taxes from his
salary since it results into a net deduction
of his pay.
Is the contention of the judge correct?
a. No. The contention is incorrect because
taxes are enforced contributions.
b. No. The contention is incorrect because
taxes must be collected in order to
support the government.
c. No.
The contention is not correct
because deduction of withholding taxes
is not a dimunition contemplated by the
fundamental law.
d. No. The contention is incorrect because
deduction of withholding taxes is
required by law.
e. None of the above.
22. The following conditions shall be observed
when there is a net capital loss carry over:
2

Is the refusal of the mayor justified?

a. The loss carried over is for a holding
period not exceeding 12 months
b. The amount of the loss
should not
exceed the income before exemptions in
the year when the loss was sustained
c. The taxpayer should not be a corporation
d. All of the above

a. No.
The refusal of the mayor is
unjustified because double taxation is
allowed in our jurisdiction.
b. No. The refusal of the mayor is not
justified because the impositions are of
different nature and character.
c. No.
The refusal of the mayor is
unjustified because it is not within his
power.
d. No. The refusal of the mayor is not
justified because double taxation will
generate more revenues.
e. None of the above.

23. What is the minimum compromise rate in

cases of doubtful validity of assessment?
a.
b.
c.
d.

40% of the basic assessed tax

10% of the basic assessed tax
No limitation
P1,000,000

26. This is a summary administrative remedy,

seizure of real property to enforce
payment of tax due:
a.
b.
c.
d.

24. Which of the following VAT transactions

are not considered zero-rated?
a. Export sales of goods
b. Domestic sale of goods in the regular
course of trade or business
c. Foreign currency denominated sale
d. Sale of gold to Bangko Sentral ng
Pilipinas
25. Barbaran municipality has an ordinance
which requires that all stores, restaurants,
and other establishments selling liquor
should pay a fixed annual fee of P20,000.
Subsequently,
the
municipal
board
proposed an ordinance imposing a sales
tax equivalent to 5% of the amount paid
for the purchase or consumption of liquor
in
stores,
restaurants,
and
other
establishments.
The municipal mayor
refused to sign the ordinance on the
ground that it would constitute double
taxation.

27.

Levy
Distraint
Forfeiture
Tax lien

Which of the following

considered as tax avoidance?
a. Splitting of donation
b. Survivorship agreement
c. Holding
period
for
transactions
d. None of the above

cannot

b. Pay the assessed tax plus surcharge, and

thereafter , ask for refund
c. Protest the assessment
d. Any of the above
29. Tino is engaged in buying and selling of
fresh fruits at the Q-Mart and Aranque
Markets. He is also exporting canned and
preserved fruits to Japan. In 2004, he made
a gross sales of P2,000,000. He is liable
for VAT registration fee of :
a.
b.
c.
d.

30. Shirley was allowed to deduct P200,000

bad debts written off in 2003, where she
had a net income before bad debts of
P180,000 and a net loss of P20,000. IN
2004, she was able to recover the bad
debts written off in full. The bad debts
recovery is:
a.
b.
c.
d.

be

31.
capital

asset

P500
P1,000
P1,500
Exempt

Taxable to the extent of P180,000

Taxable to the extent of P20,000
Taxable to the extent of P200,000
Not taxable

A taxpayer who believes that a tax

ordinance
is
unconstitutional
should
appeal to:
a.
b.
c.
d.

BIR Commissioner
Metropolitan Trial Court
Court of Tax Appeals
Secretary of Justice

28. Tony has inadvertently omitted P100,000

income in his 2004 Income Tax Return.
Upon discovery in 2005, the BIR issued an
assessment for deficiency income tax for
P100,000 plus 50% fraud surcharge.
Meanwhile, Tony included the omitted
P100,000 income in his 2005 Income Tax
Return. What advice will you give Tony?

32. Any of the following conditions should be

met to enable the President to increase
the VAT from 10% to 12% starting January
1, 2006:

a. Amend his 2004 Income Tax return to

reflect the correct amount of income

a. VAT collection to Gross Domestic Product

in the previous year exceeds 2 4/5%
3

b. National Government Deficit to Gross

Domestic Product in the previous year
exceeds 1 %
c. VAT tax effort to Gross National Product
equals 4%
d. Either a or b
33.

In 2004
donations:

Allan

gave

the

following

a. P100,000 to the Iglesia ni Kristo

b. P500,000 for campaign expenses of a
senatorial candidate
c. P200,000 to victims of calamities
d. P300,000 to IBP
Which of the above donations are subject to
donors tax?
34. Before any civil or criminal action is filed
by the BIR in court, _____________ is
necessary:
a.
b.
c.
d.

Approval
Approval
Approval
Approval

of
of
of
of

the
the
the
the

Secretary of Justice
BIR Commissioner
Secretary of Finance
President

35. The ___________ has exclusive and original

jurisdiction over all criminal offenses
arising from violations of the National
Internal Revenue Code or Tariff and
Customs Code and other laws administered
by the Bureau of Internal Revenue or the
Bureau of Customs, where the principal
amount of taxes and fees, exclusive of
charges and penalties, claimed is one
million pesos or more.
a. BIR Commissioner

b. Metropolitan Trial Court

c. Regional Trial Court
d. Court of Tax Appeals
36. The principle that where a claim for
refund/credit
is
filed
beyond
the
prescriptive period, it can still be applied
against other taxes that may be due, is:
a.
b.
c.
d.
37.

Doctrine of equitable benefit

Doctrine of equitable recoupment
Equitable tax benefit rule
Cohan Rule

The fundamental
taxation are:

principles

of

local

a. Public purpose
b. Uniformity Principle
c. Not to let the collection of taxes to
private person
d. All of the above
38. Where the gross income of a taxpayer
exceeds P150,000 per quarter his income
tax return must be accompanied by:
a.
b.
c.
d.

Audit certificate of an independent CPA

Comparative Financial Statements
Schedule of Taxes and Licenses
Summary of Income payments

39. The following income are not taxable,

except:
a. Salary of farm workers in the form of
products raised in the farm.
b. Separation pay of employees who
voluntarily resigned

c. Value
of
leasehold
improvement
constructed on the leased land
d. Increase in market value of land
e. None of the above
40. Cash dividends received from a domestic
corporation are subject to final tax of 10%
if received by:
a. Another domestic corporation
b. Resident foreign corporation
c. Non-resident
alien
engaged
trade/business in the Phil.
d. Resident Filipino citizen

in

41. Due to an uncertainty whether or not a

new
tax
is
applicable
to
printing
companies, ABC Printers submitted a legal
query to the Bureau of Internal Revenue on
that issue. The BIR issued a ruling that
printing companies are not covered by the
new law.
Relying on this ruling, ABC
Printers did not pay said tax.
Subsequently, however, the BIR reversed
the ruling and issued a new one stating
that the tax covers printing companies.
Could the BIR now assess ABC Printers for
back taxes corresponding to the years
before the new ruling?
a. Yes. The reversal of the ruling is not
prejudicial to the taxpayer.
b. Yes. The reversal of the ruling is within
the power of the BIR.
c. Yes.
The reversal of the ruling is
consistent with the lifeblood doctrine.
d. Yes. The reversal of the ruling does not
result in grave injustice to the taxpayer.
e. None of the above.
42. The following are subject to amusement
taxes:
a. Gross receipts of carnivals
4

b. Gross receipts of cinema houses

c. Professional basketball games
d. Gross receipts of circus
43. The following are considered taxes:
a.
b.
c.
d.

Toll
License
Penalty
None of the above

44. The power to tax may be delegated to:

a.
b.
c.
d.

The President
BIR
CTA
a and b only

45. The BIR Commissioner is empowered to:

a. Interpret tax laws and decide tax cases
b. Obtain
information,
summon
and
examine witnesses
c. Collect national internal revenue taxes
d. All of the above
46. Life insurance proceeds shall not be
included in taxpayers gross income when:
a. The amount does not qualify as income
b. The recipient is always the beneficiary
c. The life insurance policy always provides
for exclusion
d. The amount is paid upon the death of the
insured
e. None of the above

47. The BIR Commissioner can inquire into the

bank deposit of the taxpayer in the
following cases:

a. To determine the gross estate in estate

tax cases
b. Compromise on the ground of financial
incapacity
c. Taxpayer executes a waiver of the Bank
Secrecy Law
d. All of the above

52. JB got married to SAY last January 2004.

On November 30, 2004, SAY gave birth to
twins. Unfortunately, however, SAY died in
the course of her delivery.
Due to
complications, one of the twins also died
on December 15, 2004.
In preparing his Income Tax Return (ITR)
for the year 2004, what should JB indicate
in the ITR as his civil status:

48. Seizure and forfeiture proceedings are

within the exclusive jurisdiction of
a.
b.
c.
d.

Court of Tax Appeals

Collector of Customs
Regular courts
Secretary of Finance

49. The equal protection clause is subject to

reasonable classification. Classification to
be valid must:
a.
b.
c.
d.

Rest on substantial distinction

Germane to the purpose of the law
Not limited to existing conditions only
All of the above

50. The following are prohibited importations,

except:
a.
b.
c.
d.
e.

Weapons of war
Insidious articles
Narcotic Drugs.
Gambling devices
Live animals

51. The following BIR actions on the protest of

an assessment are tantamount to denial
thereof:
a. Filing of collection case in court
b. Issuance of warrant of distraint/levy
c. Inaction of the BIR Commissioner within
180 days from submission of supporting
documents by the taxpayer
d. All of the above

a.
b.
c.
d.
e.
53.

Single
Married with 2 dependents
Head of the family with 1 dependent
Head of the family with 2 dependents
None of the above

The following criteria need not be

observed in the exercise of the flexible
power of the President under the Tariff &
Customs Code:
a.
b.
c.
d.

National security
Welfare of the people
Jurisdiction of the Customs Commissioner
National Economy

54. Monthly support regularly given by an

unmarried daughter to her aged mother.
a.
b.
c.
d.

Taxable income of mother

Subject to donors tax
Exempt from tax
None of the above

55. The following are special customs duties,

except:
a.
b.
c.
d.

Dumping duties
Marking duties
Discriminatory duties
None of the above

56. Cancellation of debt of employee by his

employer is taxable as
a.
b.
c.
d.

Compensation income
Donation
Indirect dividend
Either a or b

57. Informers reward is equal to

a. 10% of revenues, surcharges or fees
collected by the BIR as a result of the
information given
b. P 1,000,000
c. a or b whichever is lower
d. a or b whichever is higher
58. The following are duty-free articles:
a.
b.
c.
d.

Personal articles
Articles for repair
Articles for public exposition/exhibits
All of the above

59. The following non-resident aliens can be

subject to 15% income tax on income
derived
from
sources
within
the
Philippines.
a. employed by regional area/operating
headquarters of multinational companies
b. employed by OBU
c. employed
by
petroleum
service
contractor and subcontractor
d. all of the above
60. Which of the following taxes are not
deductible from gross income:
a.
b.
c.
d.

Philippine Income Tax

Value Added Tax
Transfer Taxes
All of the above

61. Separation pay is taxable.

a. if separation is due to death, sickness or
injury of employee
b. if employee voluntarily resigned
c. if employee resigned at the age of 60
d. if the employer closed shop
e. all of the above

66. If monthly rental income of a residential

unit exceeds P 10,000 per unit, the same
shall be subject to 12% VAT.
a. True, without any further condition.
b. True, only if the total gross annual rentals
received exceed P 1.5M
c. False, this is subject to 0% VAT.
d. False, this is exempt from VAT under RA
9337

62. The following are taxed like corporation

a.
b.
c.
d.

general professional partnership

ordinary business partnership
estates and trusts
all of the above

67.

63. VAT is
a.
b.
c.
d.
e.

a. when there is a prejudicial question

b. when double jeopardy is clearly apparent
c. when charges are manifestly false and
motivated by lust for vengeance
d. when the court has no jurisdiction over
the offense
e. all of the above

special tax
local tax
specific tax
regressive tax
none of the above

64. The following taxes have been replaced by

VAT per RA 9337
a.
b.
c.
d.

fringe benefits tax

common carriers tax
caterers tax
percentage tax on banks and finance
companies
e. b and c only
65. The following are not subject to the
improperly accumulated earnings tax,
except:
a. Publicly held corporations
b. Insurance companies
c. Banks and other non-bank
intermediaries
d. None of the above

The preliminary investigation of a

fraudulent tax evasion case may be
enjoined in the following cases.

financial

68. Sale of real estate is subject to VAT

a. True, if made in the regular course of
trade or business
b. False, it is exempt if the real estate is
classified as capital asset
c. False, it is exempt if what is sold is a
residential unit
d. a and b are correct
69. Why is the Fringe Benefits Tax collectible
from the employer and not from the
employee?
a. Valuation of benefits is easier at the level
of the employer
b. Collection of FBT is ensured because it is
withheld at source
c. The employee does not have the means
to pay
6

d. a and b are correct

70. A taxpayer with gross annual sales not

exceeding P100, 000 is exempt from
payment of business tax and registration
requirements.
a. True
b. False, required to register with the BIR
but exempt from the payment of
registration fee
c. False, required to pay registration fee
d. b and c are correct
71. Which of the following statements is
wrong?
a. The MCIT is equal to 2% of the gross
income of the corporation
b. The MCIT is not computed quarterly but
on an annual basis
c. The MCIT payments can be carried over
for the next 3 years immediately
following such payment
d. The taxpayer should pay the MCIT or the
regular income tax whichever is higher.

73.

a.
b.
c.
d.
e.

are

exempt

from

professional basketball games

boxing exhibitions
billiards
bowling
c and d only

74. The following are subject to 3% common

carriers tax, except:
a.
b.
c.
d.

taxicab operators
common carriers transporting cargoes
tourist buses
motor tricycles

75. The manufacture of casino rubbing alcohol

is subject to:
a.
b.
c.
d.
e.
76.

72. In ruling on the constitutionality of the

EVAT, the Supreme Court held that:
a. A revenue bill shall originate exclusively
in the House of Representatives but the
Senate may adopt its own version
b. The requirement of three separate
readings on separate days cannot be
dispensed with
c. The Bicameral Conference Committee
cannot make unauthorized insertions on
the Senate version of the bill
d. b and c are incorrect

The
following
amusement tax:

A tax imposed at every stage of

distribution process on the sale, barter or
exchange of goods and services and
transactions deemed sale, as well as
importation of goods and services.
a.
b.
c.
d.

77.

VAT
percentage tax
specific tax
ad valorem tax
exempt

privilege tax
percentage tax
VAT
excise tax

Mario
disputed
a
deficiency
tax
assessment and upon receipt of an adverse
decision by the Commissioner of Internal
Revenue, filed an appeal with the Court of
Tax Appeals. While the appeal is pending,
the BIR served a warrant of levy on the
real properties of Mario to enforce the
collection of the disputed tax. Granting

arguendo that the BIR can legally levy on

the properties, what could Mario do to stop
the process?
a. Appeal the BIRs action to the Court of
Appeals
b. Dispute BIRs levy on the properties
before the Court of Tax Appeals
c. File a motion for injunction with the Court
of Tax Appeals on the ground that such
collection will jeopardize the interest of
the taxpayer or the government.
d. Secure a temporary restraining order
before the Supreme Court.
e. None of the above
78. Additional exemption for each dependent
child per RA 9504
a.
b.
c.
d.

P
P
P
P

10,000
9,000
8,000
25,000

79. Income tax is not a

a.
b.
c.
d.
e.

personal tax
national tax
excise tax
direct tax
progressive tax

80. Under RA8424, the allowable deduction

for medical expenses of a resident
decedent shall not exceed :
a.
b.
c.
d.

P
P
P
P

50,000
550,000
5,000
500,000

81. Per RA 9504, how much is the total

personal and additional exemption of Mrs.
A, who became a widow during the taxable
year and supporting her mother and one

mentally retarded illegitimate 25 year-old

child?
a.
b.
c.
d.

P
P
P
P

a. There must be gain or profit

b. The gain must be received or realized
c. The gain must not be excluded by law or
treaty from taxation
d. The income must exceed the personal
and additional exemptions of the
taxpayer
e. None of the above

75, 000
40, 000
100, 000
48, 000

82. The following is not a taxable income of a

resident Filipino citizen:
a.
b.
c.
d.
e.

a. proceeds of life insurance policy payable

to an irrevocable beneficiary
b. revocable transfers
c. transfer in contemplation of death
d. claims against insolvent persons
e. none of the above
84. Basically, power of taxation is exercised
by

86.

optional
in addition to the itemized deductions
not available to resident decedents
in lieu of all itemized deductions

The following are the requisites

income to be taxable, except:

87.

Who among the following are

required to file an income tax return?

NOT

a. Filipino citizen with business income from

the Philippines.
b. Resident alien on income derived within
the Philippines.
c. Non-resident alien engaged in trade or
business
d. An individual whose sole income has
been subjected to final withholding tax.
88. Which of the following are NOT exempt
from income tax?

the President
the Congress
Judiciary
BIR
All of the above

85. The standard deduction of P 1,000,000

from the gross estate is:
a.
b.
c.
d.

a.
b.
c.
d.
e.

Tax evasion
Tax avoidance
Tax exemption
Shifting
All of the above

income from an illegal business

income from a business abroad
income from casino
winnings from lotto
none of the above

83. Which of the following are excluded from

the gross estate?

a.
b.
c.
d.
e.

90. Which escape from taxation does not

result
in
loss
of
revenue
to
the
government?

for

a.
b.
c.
d.
e.

Philippine Health Insurance Corporation

Philippine National Oil Company
University of the Philippines
PAGCOR
b and d

89. Which of the following is a qualified

dependent for additional exemption?
a.
b.
c.
d.
e.

45 years old mentally retarded son

an illegitimate child
legally adopted child
all of the above
none of the above

91. The following fringe benefits are not

taxable, except:
a. Fringe benefits which are authorized and
exempted from tax under special laws.
b. Contributions of the employer for the
benefit of the employee to retirement,
insurance and hospitalization benefits.
c. Membership fees, dues and other
expenses borne by the employer in social
or athletic clubs or other similar
organizations.
d. Benefits
given
to
rank
and
file
employees, whether granted under a
collective bargaining agreement or not.
e. De minimis benefits.
92. The final tax on capital gains from sale of
real property, classified as capital asset is:
a. 20% based on the gross selling price or
current fair market value whichever is
higher.
b. 7.5% based on the gross profit.
c. 6% based on the gross selling price or
zonal value, whichever is higher.
d. 6% of the purchase price or the assessed
value whichever is higher.
8

e. None of the above

93. Sale, barter, exchange or other disposition
of shares of stocks which are traded in the
local stock exchange is subject to:
a. capital gains tax of 5% and 10% of
capital gain
b. percentage tax of of 1% of selling price
c. 10% VAT
d. none of the above

a. There must be a valid and subsisting

debt.
b. The debt must be charged off during the
taxable year.
c. The debt must be actually ascertained to
be worthless and uncollectible during the
taxable year.
d. It must be evidenced by a closed and
completed transaction.

a. True
b. False, if Domeng is engaged in the real
estate business.
c. False, it is subject to VAT if the sale is in
the regular course of trade or business.
d. b and c are correct.
95.

Who may not avail of the

deductions from gross income?

itemized

96.

The following are requisites for

deductibility of bad debts, except:

not political
penal
civil
both a and b
both a and c

the

101. No credit/refund of taxes

allowed unless the taxpayer:

shall

be

a. Files a written claim for credit/refund

with the BIR within 2 years from payment
b. Pays the tax under protest
c. Appeals to the CTA
d. Amends his tax return

98. Under the Life-Blood doctrine, the main

source of revenue of the government is
taxes.
The power to tax includes the power to
destroy in all cases.

102. The oft-cited doctrine that taxes are

lifeblood of the government does not
favor one of the following rules:

a. Both statements are true.

b. Both statements are false.
c. The first statement is true while the
second statement is false
d. The first statement is false while the
second statement is true.

a. Taxes are not subject to set off

b. Taxes should be collected without
unnecessary hindrance
c. Tax exemptions should be sparingly
granted
d. Doctrine of Equitable Recoupment

99. Which of the following is not a source of

tax laws?

a. Resident aliens
b. Non resident aliens engaged in trade or
business in the Philippines.
c. Resident foreign corporations.
d. Citizens and resident aliens whose
income is purely compensation income.

a. Taxable
compensation
income
and
subject to withholding tax.
b. Not taxable.
c. Taxable compensation income but not
subject to withholding tax.
d. Subject to donors tax.

97. What is the nature of tax laws?

a.
b.
c.
d.
e.

94. Domeng bought a parcel of residential

land for P 1,000,000 sometime in 1980. He
sold the same to Norbie for P 10,000,000
on October 15, 2000. The transaction is
subject to 6% capital gains tax.

100. Tips and gratuities paid directly to an

employee by a customer and not
reported to the employer

a. Administrative regulations and rulings or

opinions of the Secretary of Justice.
b. Administrative regulations and rulings or
opinions of the Secretary of Budget and
Management.
c. Administrative regulations and rulings or
opinions of the Commissioner of Internal
Revenue.
d. Administrative regulations and rulings or
opinions of the Secretary of Finance.

103.

Taxes are not enforced proportional

contributions. In our jurisdiction, the
following
statements
are
correct
except:
a.
b.
c.
d.

Taxes are obligations created by law.

Taxes are based on ones ability to pay.
Taxes are levied by authority of the law.
The power to tax is not unlimited.

104.
Which
of
the
following
pronouncements is most recent:

judicial

a. Upon taxation depends the Governments

ability to serve the people for whose
benefit taxes are collected.
b. The BIR should be given the necessary
discretion to avail itself of the most
expeditious way to collect taxes.
c. Taxes cannot be imposed by the
executive department not by the courts.
d. The best evidence obtainable under
Section 6 (B) of the NIRC does not include
mere photocopies of records/documents.
105. Congress passed a law allowing the
payment of taxes in kind/services. This
violates the principle of:
a.
b.
c.
d.

Economic efficiency
Fiscal adequacy
Theoretical justice
Administrative feasibility

106. Which of the following statements may

not be untenable:
a. The nature of the states power to tax is
two-fold.
b. Legislative power to tax involves the
promulgation of rules.
c. The rule of taxation should not be
proportionate.
d. Tax exemptions are liberally construed in
favor of the government.
107. The following propositions are erroneous
exept:
a. Public purpose includes indirect public
advantage.
b. The power to tax is inherent because it
requires a set of rules.
c. Taxes are always based on the amount
received by the taxpayer.

d. Taxpayer must receive personal benefit

for the payment of tax.
108. The power to tax involves the power to
destroy, said Chief Justice Marshall of
the US Supreme Court. This should be
construed to mean that:
a. The power of taxation is unlimited
b. The power to tax may be used solely for
the purpose of raising revenues.
c. The power to tax includes the power to
regulate even to the extent of prohibition
or destruction.
d. The power to tax is superior to all other
forms of the government.
109. The secondary or non-revenue purposes
of taxation include the following except:
a. As an implement of the police power of
the State
b. To encourage the growth of local
industries.
c. To reduce social inequality
d. To protect our local industry against
unfair foreign competition.

a.
b.
c.
d.

Vanishing deduction
Allowable deduction
Exemption method
None of the above

112. The following items are taxable except:

a.
b.
c.
d.
e.

Illegal gains
Tax refund involving deductible tax
Tax refund involving non-deductible tax
Cash dividend
Annuities

113. Gross income means all income derived

from whatever source, including the
following items except:
a.
b.
c.
d.

Pensions
Prizes and winnings
Rents
Stock dividends

114. Exclusions from gross income under the

Tax Code include the following except:
a.
b.
c.
d.

Veterans benefits
Compensation for injuries and sickness
Gifts, bequests, and devises
Gains from redemption of shares of stock

110. Which of the following statements is

true:

115. Fringe benefit tax shall be paid by the

employer because:

a. Payment signifies an act of compliance

by the taxpayer.
b. The act of assessing and collecting taxes
is administrative in character.
c. Symbiotic relationship theory is different
from benefits received principle.
d. All of the above.

a. The employee received the benefit net of

tax
b. The Tax Code expressly so states
c. The employer relieves the employee of
the burden to pay the tax
d. The employer is the agent of the
employee for the payment thereof.

111. Which of the following prevents the

occurrence of double taxation?

116. Allowable deductions are distinguished

from personal exemptions in that:

10

a. The former may be availed of only by

corporate taxpayers, whereas the latter
may apply to individual taxpayers.
b. The former applies to corporate and
individual taxpayers engaged in business
or are practicing their profession,
whereas the latter covers only natural
persons.
c. The former may be found in Section 34,
while the latter is granted under Section
35.
d. The former is a privilege while the latter
is a matter of right.
117. Which of the following statements is not
correct?
a. Interest on government securities is not
tax exempt effective January 1, 1998.
b. Stock dividend is tax exempt.
c. Premium on life insurance may be
taxable to the employee.
d. Fringe benefit is subject to 32% final tax
effective January 1, 2000.
118. Gross estate includes the following items
except:
a.
b.
c.
d.

Transfer for insufficient consideration

Donations mortis causa
Revocable transfers
Transfer
under
special
power
appointment.

Taxes
are
the
lifeblood
of
the
government and their prompt and certain
availability is an imperious need. This
pronouncement was cite in several
decisions of the Supreme Court except in
the case of:
a.
b.
c.
d.

Commissioner vs. Pineda, 21 SCRA 105

Vera vs. Fernandez, 89 SCRA 199
Lutz vs. Araneta, 98 SCRA 148
Philex Mining vs. CIR, 294 SCRA 678

121. Lest the collector kill the hen that lays

the golden egg.
This has been
metaphorically mentioned to justify a
settled rule as laid down in the case of:
a.
b.
c.
d.

Gomez vs. Palomar, 25 SCRA 827

Punzalan vs. Manila, 95 SCRA 46
Roxas vs. CTA, 23 SCRA 276
Villegas vs. Pao, 86 SCRA 270

122. The symbiotic relationship theory as

enunciated in the case of CIR vs. Algue,
Inc., 158 SCRA 9, is an amplification of:
a.
b.
c.
d.

Ability to pay principle

Progressive system of taxation
Lifeblood doctrine
Benefit-protection theory

Second cousin
Half brother
Lineal descendant
Collateral relative within the fourth civil
degree of relationship

123. Settled is the rule that in tax matters,

the government is not estopped by the
errors or mistakes committed by its
agents or officers.
This should be
construed to mean that:
a. The power
unlimited.

to

tax

is

supreme

b. The power to tax is plenary and

comprehensive.
c. The state may still collect prescribed
taxes.
d. BIR can still present evidence to prove
assessment.
124. Srictissimi juris may be applied in the
construction and interpretation of tax
laws except:
a.
b.
c.
d.

Local ordinance imposing business tax.

Local ordinance granting tax amnesty.
Provision of the NIRC granting tax credit.
Special law lowering tax rate.

125. May a taxpayer who has claim for VAT

input credit or refund, set-off said claim
against his other tax liabilities?
a. Yes, provided that the claim is set-off
against other unpaid income tax.
b. Yes, provided that the claim is set-off
against other national internal revenue
tax.
c. Yes, provided that the claimant is a VATregistered taxpayer.
d. Yes, provided that the claim is duly
substantiated by receipts.
126. The police power, the power of taxation
and the power of eminent domain are
co-equal and inherent powers of
government.
May a tax be validly
imposed in the exercise of the police
power and not of the power to tax?

of

119. Donation to stranger is subject to 30% of

the net gift. Stranger includes:
a.
b.
c.
d.

120.

and

a. Yes, because the power to tax and police

power have some similar objectives.
b. Yes, because the police power of the
state includes the power to regulate
c. Yes, because taxes may be imposed to
regulate.
d. Yes, because taxation also involves the
power to carry out the legitimate objects
of government.
11

127. Taxes are not subject to set-off because:

a. Taxes
are
the
lifeblood
of
the
government.
b. Taxes are the sinews of the state.
c. Taxes are enforced charges
d. Taxes should be collected without
unnecessary hindrance
e. Taxes are not ordinary obligations.

e. None of the above.

131. Any amount received under claim of right

is taxable if:
a. It arises from illegal transaction.
b. It is received without restriction as to its
disposition.
c. It is decreed by the court
d. The claimant dies
e. The claimant donates the same

128. May the collection of taxes be barred by

prescription?
a. Yes, provided that they are income taxes.
b. Yes, provided that they are local taxes.
c. Yes, provided that they are custom
duties.
d. Yes, provided that the tax law provides
for prescriptive periods.
e. Yes, provided that they are imposed by
special laws.
129. May the courts enjoin the collection of
revenue taxes?
a. No, because taxes are the lifeblood of the
government.
b. No, because taxes are needed to carry
out the legitimate objects of the
government.
c. No, except if the collection will jeopardize
the interest of the taxpayer.
d. No, except if the taxpayer is financially
incapable.
e. None of the above.
130. What is the purpose of the doctrine of
constructive receipt of income?
a. To ensure collection of taxes.
b. To compel taxpayers to report their
income
c. To prevent tax evasion.
d. To prevent the taxpayer on the cash basis
from postponing the actual receipt of
taxable income.

135. Tax applicable to certain specified goods

or articles manufactured or purchased
in the Philippines for domestic sale or
consumption.

132.

Taxable rent income

following items except:

includes

the

a. Value of permanent improvement

b. Premiums paid on the insurance of the
leased premises
c. Royalties
d. Interest on bond issued by the lessor
133. Income from long-term contracts may not
be reported under one of the following
methods:
a.
b.
c.
d.
e.

Outright method
Spread-out method
Completed contract basis
Accrual basis
Cash basis

134. How is compensation paid in promissory

note treated for income tax purpose?
a. Subject to final tax
b. It is taxed at gross amount
c. Taxable to the amount of the fair market
value of the promissory note
d. It is deductible from gross compensation
income
e. None of the above

a. Specific tax
b. VAT
c. Percentage tax
d. Excise tax
136. Cost of carabao used in farming is
deductible as any ordinary expense.
a. True
b. False, because carabao is a capital
expenditure
c. False, because carabao is subject to
depreciation
d. Both b and c
137. Under RA 9337, a presumptive input tax
credit
is
allowed
to
processors/manufacturers
of
milk,
sardines,
mackerel,
refined
sugar,
cooking oil, and packed noodle-based
instant meals at the rate of:
a.
b.
c.
d.

1.5%
4%
2%
8%

138. Tax evasion is:

a. Means of escape from tax liability outside
what is legal and permissible
b. Tax saving device within the means
sanctioned by law
c. Deduction from foreign taxes paid
d. a and c only
139. The following are qualified dependents of
a head of the family, except:
a. Either or both parents
b. Brother/Sister of whole or half-blood
c. Senior citizen
12

d. Grandchildren
140. Which of the following is deductible for
income tax purposes:
a.
b.
c.
d.

Employers contribution to pension trust

Personal, family, living expenses
Wagering losses
Kickbacks

the term
include:

initial

payments

shall

a. Payments made in the year of sale in

addition to the down payment
b. Mortgage on the real property sold not
exceeding the cost thereof
c. Evidence of indebtedness issued by the
purchaser to the seller at the time of sale
d. Down payment only made at the time of
sale.

b. 13th month pay and de minimis benefits

c. Dividends received by a domestic
corporation from another domestic
corporation.
d. Interest on deposits with BPI Family Bank
e. None of the above

141. For tax purposes, income is synonymous

to:
a.
b.
c.
d.

Capital
Receipts
Realized profit
None of the above

142. The following can avail of the Input Tax

Credit, except:
a. Importer of goods/articles previously
subjected to VAT
b. Purchaser of domestic goods upon
consummation of the sale
c. Exporter of goods and services not
registered under the VAT system
d. Purchaser of services, lessee or licensee
upon payment of compensation, rental,
royalty or fee
143. Educational services rendered by private
educational institutions are exempt
from VAT if duly accredited by the
following, except:

145. In our jurisdiction, which of the following

statements may be erroneous:
a. Taxes are pecuniary in nature.
b. Taxes
are
enforced
charges
and
contributions.
c. Taxes are imposed on persons and
property within the territorial jurisdiction
of a State.
d. Taxes are levied by the executive branch
of the government.
e. Taxes are assessed according to a
reasonable rule of apportionment.
146. Determine which of the following items
are taxable:
a. Income from jueteng
b. Gain arising from expropriation of
property
c. Taxes paid and subsequently refunded
d. Recovery of bad debts previously
charged off
e. All of the above

a. Securities and Exchange Commission

b. Commission on Higher Education
c. Department of Education, Culture and
Sports
d. Technical
Education
and
Skills
Development Authority

147. Determine which of the following is (are)

included in the preparation of annual
income tax returns:

144. For VAT purposes in connection with

deferred payment sale of real property,

a. Proceeds of life insurance received by a

child as irrevocable beneficiary

148. JR was a passenger of an airline that

crashed. He survived the accident but
sustained serious physical injuries
which required hospitalization for 3
months.
Following negotiations with
the
airline
and
its
insurer,
an
agreement was reached under the
terms of which JR was paid some
amounts.
Which of the following
amounts constitute taxable income?
a. P500,000 for his hospitalization
b. P250,000 as moral damages
c. P300,000 for loss of income during the
period of his treatment and recuperation
d. JR received from his employer the
amount of P200,000 representing the
cash equivalent of his earned vacation
and sick leaves.
149. MAR got married to SALLY last January
2005. On November 30, 2005, SALLY
gave birth to twins.
Unfortunately,
however, SALLY died in the course of
her delivery. Due to complications, one
of the twins also died on December 15,
2005.
In preparing his Income Tax
13

Return (ITR) for the year 2005, what

should MAR indicate in the ITR as his
civil status?
a.
b.
c.
d.
e.

Single
Married
Head of the family
Widower
None of the above

150. Which of the following cases may not be

compromised:
a. Delinquent accounts
b. Cases under administrative protest, after
issuance of the final assessment notice
to the taxpayer, which are still pending.
c. Criminal tax fraud cases
d. None of the above

151. A taxpayer received a tax deficiency

assessment of P1.2 Million from the BIR
demanding payment within 10 days,
otherwise, it would collect through
summary remedies.
The taxpayer
requested for reconsideration stating
the grounds therefore.
Instead of
resolving
the
request
for
reconsideration, the BIR sent a Final
Notice before Seizure to the taxpayer.
Which of the following remedies can the
taxpayer avail?
a. File an injunction before the Regional Trial
Court
b. Appeal to the Court of Tax Appeals
c. Appeal to the Court of Appeals
d. Proceed with Certiorari before the
Supreme Court

152. The Roman Catholic Church owns a 2hectare lot in a town in Tarlac province.
The Church and a convent occupy the
southern side and middle part.
The
southeastern side by some commercial
establishments, while the rest of the
property, in particular the northwestern
side, is idle or unoccupied. Which of
the following is correct?
a. The Church may claim tax exemption on
the entire land.
b. The exemption covers only the southern
side and middle part occupied by the
Church and a convent and the eastern
side by a school run by the church.
c. The tax is imposable on the northwestern
side which is idle or unoccupied.
d. The entire property is taxable for real
property taxation
153. XYZ Colleges is a non-stock, non-profit
educational institution run by the
Archdiocese of BP City. Which of the
following item(s) is included in its
Income Tax Return?
a.
b.
c.
d.

Tuition fees
Laboratory fees
Rentals from canteen concessionaires
Interest from money-market placements
of the tuition fees
e. Donation of a lot and building by school
alumni
154. Frank Sinatra, an American Citizen, was a
top executive of a US company in the
Philippines until he retired in 1999. He
came to like the Philippines so much
that following his retirement, he
decided to spend the rest of his life in
the country. He applied for and was
granted a permanent resident status
the following year.
In the spring of
2004, while vacationing in Orlando,
Florida, USA, he suffered a heart attack

and died. Which of the following assets

shall not be included in taxable gross
estate in the Philippines?
a. Bank Deposits with Citibank Makati and
Citibank Orlando, Florida
b. A condominium unit in Makati
c. Shares of stock in the Philippine
subsidiary of the US Company where he
worked.
d. Shares of stock in San Miguel Corporation
and PLDT.
e. Shares of stock in Disney World in Florida
f. None of the above
155. An individual client not engaged in realty
business paid in full the P50,000
attorneys fees of his counsel in lot
which he bought in 1990 for P5,000 and
which has a fair market value of
P60,000. Which of these is correct?
a. The client-transferor is subject to final
capital gains tax based on P60,000
b. The client-transferor is subject to final
capital gains tax based on P50,000
c. The client-transferor is not subject to
final capital gains tax
d. The client-transferor is subject to income
tax for the difference between P50,000
and P5,000
e. None of the above

156. One of these is not the correct period

within which internal revenue taxes
shall be assessed:
a. Within 3 days after the last day
prescribed by law for the filing of the
return
14

b. Within 3 years from the date the return

was filed
c. If no return was filed, within 10 years
from date of discovery of failure to file
return
d. If return is false or fraudulent, within 10
years from date of discovery of the falsity
or fraud.
157. One of these is not an exception to the
rule that for income tax purposes, the
books and records of a taxpayer shall
be
subject
to
examination
and
inspection only once in a taxable year:
a. When the taxpayer is outside the
Philippines
b. When there is fraud, irregularity or
mistake
c. Verification
of
compliance
with
withholding tax laws
d. When taxpayers requests reinvestigation
e. Verification of capital gains tax liabilities
158. Which of the following cases is preassessment notice required?
a.

In a discrepancy between the tax

withheld and the amount actually
remitted by the withholding agent
b. When the excise tax due has not been
paid
c.Transfer by an exempt person of articles to
non-exempt person
d. When the commissioner or his duly
authorized representative finds that
proper tax should be assessed.

159. To pre-empt the lapse of prescriptive

period within which the government
can assess and/or collect in court
without assessment,
a. The government may issue jeopardy
assessment
b. The government may require waiver of
prescriptive period
c. The waiver by the taxpayer must be
accepted by the commissioner or his duly
authorized deputy.
d. The waiver is a waiver by the taxpayer of
his right to invoke the defense of
prescription.
e. b, c and d only
160. One of these is true:
a. Waiver of prescriptive period to last until
the completion of investigation is valid.
b. Waiver is a taxpayers concession to the
state, thus, it must be construed strictly
against the state
c. Waiver being unilateral, the state need
not express its acceptance, and when
accepted, the taxpayer need not be
notified.
d. Waiver being unilateral, acceptance by
the state need not observe the level of
authority of the officials empowered to
accept.
161. One of these has no time limit within
which to assess:
a.
b.
c.
d.

Income tax
Transfer taxes (donor or estate)
Value Added Tax
Privilege tax

b. Municipal fees & service charges

c. Real property taxes
d. Taxes on gross receipts of transportation
businesses

163. For casual sale of real property, you do

not pay
a.
b.
c.
d.
164.

Capital gains tax

Documentary stamp tax
Local transfer tax
Income tax

In local business taxes,

government
of
one
of
prohibited to collect
a.
b.
c.
d.

the local
these
is

factory site
Principal office
places thru which sales trucks pass
none of the above

165. Special classes of real property do not

include
a.
b.
c.
d.

Local water district

Public power generating company
Hospitals
Schools

166. Which is not a levy on real property

a.
b.
c.
d.

Special education fund

Ad valorem tax on idle land
Special assessment
Transfer tax on sale or transfer

162. One of these is not a type of local tax

and other impositions
a. Municipal
taxes
occupations

on

business

&

15

ANSWER KEY TAXATION

1. D
2. B
3. A
4. D
5. A
6. C
7. A
8. B
9. A
10 .D
11. D
12. D
13. C
14. A
15. D
16. D
17. D
18. D
19. B
20. D
21. C
22. D
23. A
24. B
25. B
26. A
27. D
28. C
29. A
30. C

31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.

D
D
D
B
D
B
D
A
B
D
E
B
D
D
D
D
D
B
D
E
D
B
C
C
D
D
C
C
D
D

61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.

B
B
C
E
D
B
C
D
B
B
B
A
E
B
D
C
D
D
C
D
A
D
A
B
B
D
D
E
D
D

91. C
92. C
93. B
94. A
95. D
96. D
97. E
98. C
99. B
100 .A
101. A
102. D
103. D
104. C
105. D
106. C
107.A
108. C
109. B
110. B
111. C
112. C
113. D
114. D
115. D
116. B
117. C
118. D
119. A
120. C

121. C
122. D
123. B
124. A
125. B
126.C
127. E
128. D
129. C
130. C
131. B
132. A
133. E
134. E
135. D
136. A
137. B
138. A
139. D
140. A
141. B
142. C
143. A
144. A
145. D
148. E
147. E
148. C
149. B

150.
151.
152.
153.
154.
155
156.
157.
158.
159.
160.
161.
162.
163.
164.
165.
166.

C
B
B
C
F
A
A
C
D
E
B
D
D
D
C
B
D

16