Saint Paul School of Business and Law

Palo, 6501, Leyte, Philippines

ACCOUNTANCY DEPARTMENT

Preboard Examination in TAXATION

Name: _______________________________________________
Schedule: ____________________________________________

Score: _____________

Instructions: Read each question carefully. On the answer sheet given, shades the
corresponding letter of your answers.
1. The US embassy donated vehicle to the Department of Foreign Affairs of the
Philippines. Which of the following statements is correct?
a. This transaction is exempted from payment of donors tax only.
b. This transaction is exempted only from payment of documentary stamp tax.
c. This transaction is exempted from payment of both donors tax and
documentary stamp tax.
d. This transaction is subject to both donors tax and documentary stamp tax.

2. A taxpayer gives the following reasons in 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 he drives no benefit from the tax.
d. That the prescriptive period for the tax has elapsed.

3. Which statement refers to police power as distinguished from taxation?

a. It is restricted by Constitutional provision.
b. It is superior to the non-impairment clause of the constitution.
c. It involves the taking of property by the government.
d. The amount imposed has no limit.
4. Which of the following is a correct nature of restriction to exercise taxation
power?
Constitutional Limitation
Inherent Limitation
a. Territorial jurisdiction
b. International comity
No
c. Rule of uniformity and equity
No
d. Due process of law
No

Yes

Yes
Yes
No
Yes

5. Which of the following is not true?

Taxation Power
Domain
a. Inherent to the existence
Yes
Yes
of the government
b. Not legislative in nature
No
No
1

Police Power
Yes
No

Eminent

c. Superior to the nonNo

Impairment clause
d. Restricted by just
Yes
compensation

Yes

Yes

No

No

6. Which of the following statements is correct?

a. Indirect double taxation is legal as long as there is no violation equal
protection and uniformity clauses of the Constitution.
b. Indirect double taxation violates the Constitutional provision of uniformity
and equal protection.
c. There is direct double taxation in taxing the income of corporation and
again subject the portion of that income declared as dividend to final tax.
d. Direct double taxation is prohibited by the Constitution.
7. Which of the following is not correct?
a. In the absence of specific tax provision, taxes in general are not
cancelable.
b. Prescriptive period for assessment and collection is applicable to
returnable taxes.
c. The law on prescription being a remedial measure should be interpreted
liberally in order to protect the taxpayer.
d. The prescriptive period should be the shorter between the required filing
date and the actual date of filing.
8. To spread the burden of taxation, the corresponding estimated tax is collected at
once every payroll period so that at the end of taxable year, the amount of tax
withheld will be equal or approximate to the actual tax for the year. This taxation
system of collection at source is based on what tax principle?
a. Fiscal adequacy
c. Administrative feasibility
b. Theoretical justice
d. Due process of law
9. One of the following situs of taxation is not true.
Located or Earned
Within
a. Taxable
Citizen
b. Taxable
c. Taxable
d. Taxable

Outside

income of nonresident

Yes

No

estate of resident alien

donation of resident citizen
sale
Yes

Yes
Yes

Yes
Yes
Yes

10. Which of the following is not correct?

a. In the absence of specific tax provision, taxes in general are not cancelable.
b. Ad valorem taxes are imposed based on the standard of weight or
measurement.
c. Prescriptive period for assessment and collection is applicable to returnable
taxes.
d. The law on prescription being a remedial measure should be interpreted
liberally in order to protect the taxpayer.
11. Which of the following statement is not true?
a. If a taxpayer is acquitted in a criminal violation of the Tax Code, this acquittal
does not exonerate him from his civil liability to pay the taxes.
b. A convention for tax evasion is not a bar for collection of unpaid taxes.
c. A tax assessment is necessary to a criminal prosecution for willful attempt to
defeat and evade payment of taxes.
2

d. Criminal proceedings under the Tax code are now a mode of collection of
internal revenue taxes, fees or charges.
12. Statement 1: The law on prescription being a remedial measure should be
interpreted liberally.
Statement 2: Doubts as to whether double taxation has been imposed should be
resolved in favor of
the taxpayer.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are not correct.
13. Which of the following is not required to file an income tax return?
a. Resident citizen with respect to his business income earned outside the
Philippines
b. An employee with only one employer and whose compensation income is
fully collected with creditable withholding tax
c. Non-resident citizen with respect to his compensation income earned within
the Philippines.
d. Non-resident alien with respect to his business income earned within the
Philippines
14. Which of the following amount of winnings/ prizes is subject to final tax of 20%?
a. P10,000 winnings outside the Philippines
b. P10,000 winnings earned within the Philippines
c. P1,000 Philippines Sweepstakes winnings
d. P9,000 first prize singing contest
15. A Filipino special taxpayer is taxable on his gross compensation income if his
total earnings during the taxable year from multinational enterprises amounted to
more than P975,000.
a. Yes, provided that the amount is to be reduced by personal exemption.
b. Yes, provided that the amount is said taxpayer has the option to be taxed at
special tax rate of 15% or normal tax
c. Yes, for as long as the tax rate applicable is 15%
d. No, because the special tax rate is applicable only to aliens classified as
special taxpayer.
16. The share of a partner in the income of a commercial partnership is
a. Subject to final tax of 10%.
b. Subject to creditable tax of 10% if the amount is P720, 000and below and
15%if the amount is more than P720, 000.
c. Subject to normal tax of individual taxpayer
d. Tax-exempt
17. Which of the following is subject to tax?
a. Share of co-venturers in the income of a taxable joint venture.
b. Capital gains on sale of partners capital
c. Income of a general professional partnership
d. Dividend income of a commercial partnership from a domestic corporation.
18-19: J, married with unemployed wife and one qualified dependent child, and R,
single, are partners in J, R, & Co., a general professional partnership. They are
sharing profits and losses as follows: J 70% and R 30%. For the calendar year
ended 200x, the income and expenses of the partnership and the income and
expenses of the partnership and the income and expenses of the personal accounts
of the partners are as follows:
J , R & Co.
Personal J
Personal R,
Gross income
P325,000
P85,000
P65,000
Expenses:
Allowable deductions
175,000
35,000
15,000

Charitable contributions
Drawings by J and R from the
partnership during the year
15,000

15,000

1,750

39,000

620

24,000

18. The taxable net income of J, if he opted for itemized deduction is

a.
P67,650
c.
P96,750
b.
P71,250
d.
P146,250
19. The taxable net income of R, if he opted for optional standard deduction
is
a.
b.

P112,500
P97,500

c.
d.

P77,500
P47,500

20. A Co. and B Co. formed a joint venture for a construction project of the
government. The companies agreed that they share profit equally. The joint venture
received the total contract price of P10,000,000. The cost of the project amounted
to P6,000,000. Operating Expenses related to the joint venture amounted to
P1,000,000. How much is the income tax due of the joint venture?
a. 1,200,000
c.
600,000
b. 900,000
d.
0
21. One of the following earnings is not considered as income of a nonresident
foreign corporation subject to normal tax of 30% on the gross amount.

a.
b.
c.
d.

Rent of aircraft chartered by Philippine nationals

Capital gains from sale of shares of stock
Gains, profits and income from casual sales
Interest dividends and royalty income

22. The following corporate income are subject to income tax, except
a. Cash dividends received from a domestic corporation by another domestic
corporation
b. Royalty income received from a domestic corporation
c. Interest income on foreign loans
d. Inter-corporate dividends received by a nonresident foreign corporation from
a domestic corporation
23. For taxation purposes, the following are taxable corporation, except
a. National Power Corporation
c. ABC Trading
Partnership
b. EGV & Company Auditing Firm
d. PAGCOR
24. Which of the following is an incorrect determination of income tax?
a. 25% on gross income within of a nonresident cinematographic film
b. 30% income tax on the net taxable income of a nonresident foreign
corporation
c. 10% income tax on proprietary education institution
d. 30% income tax on net business income of government owned and controlled
corporation
25. Which of the following corporation is subject to IAET?
a. Publicly-held corporations
c. Family-closed
corporation
b. Banks and other nonbank financial intermediaries
d. Insurance
companies
26. Statement 1: A domestic corporation subjected to normal corporate income tax
is exempt from
Improperly Accumulated Earning Tax.

Statement 2: Both domestic and resident foreign corporations are subject to

improperly
accumulated earning tax.

a.
b.
c.
d.

Only statement 1 is correct

Only statement 2 is correct
Both statements are correct
Both statements are incorrect

27. Adobo Corporation, a domestic corporation, shows the following data for the
taxable year 2016:
Gross Sales
P
3,000,000
Cost of Sales
1,400,000
Capital gains on sale of paintings
940,000
Dividend income (domestic)
200,000
Operating expenses including charitable contribution
800,000
Charitable contribution
100,000
The income tax due would be:
a. P524,400
b. P522,000

c. P240,000
d. P256,500

28. San Miguel Corporation, a domestic corporation, has earned the following
passive income within the
Philippines for the taxable year 201A:
Interest from savings deposits
P
3,000,000
Royalty Income
1,000,000
Interest from depository bank under expanded foreign currency
deposit (P30,000 at P 50 per US Dollar)
1,500,000
Dividends from Jollibee, a domestic corporation
200,000
Dividends from Microsoft, a non-resident foreign corporation
800,000
What is the total amount of final taxes on passive income?
a. P 800,000
c. P 912,500
b. P 880,000
d. P 992,500
29-30: The SPSPS, a private educational institution, provided the following income
and expenses for the year 2015 and 2016:
Educational income:
Tuition and miscellaneous fees
Sales of canteen
Sales of bookstore
Non-educational income:
Rent income, net of CWT
Sale of scrap materials
Costs and expenses:
Cost of sales canteen
Costs of books sold
Operating expenses
Purchase of library books
Costs of classroom construction
Purchase of school furniture

2015
2016
P4,000,000 P6,000,000
700,000
1,600,000
300,000
400,000
4,940,000 5,225,000
60,000
20,000
400,000
800,000
240,000
320,000
2,000,000 3,000,000
1,000,000 1,500,000
500,000
200,000

The operating expenses do not yet include the cost of capital expenditures. The
fixed assets are estimated to be useful for 10 years.
5

29. What would be the 2015 income tax still due and payable per ITR of SPSPS using
tax minimization principle as allowed by the existing Tax Laws and regulations?
a. P2,241,000
c. P1,836,000
b. P1,981,000
d. P1,576,000
30. What would be the 2016 income tax still due and payable per ITR of SPSPS using
tax minimization principle as allowed by the existing Tax Laws and regulations?
a. P395,000
c. P670,000
b. P548,000
d. P823,000
31. This rule is not applicable on the construction of tax laws
a. If the law is repealed, taxes assessed before repeal of the may no longer be
collected.
b. If the intent of the tax as not clear as to whether the taxpayer is covered by
the tax obligation, the law shall be construed against the government.
c. Where the intent to tax is clear and the taxpayer claims his exempt from the
obligation, the tax shall be construed against the government.
d. Provisions intended for the security of the taxpayer or to insure equality or
uniformity of taxation are mandatory.

32. In a loan agreement between the Bangko Sentral ng Pilipinas (as borrower) and
private international banks (as lenders), it is stipulated that all payments of interest
by the Central Bank to the lenders shall be made free and clear from all Philippine
taxes which may be imposed thereon. Is the stipulation valid?
a. Yes, based on international comity.
b. Yes, based on the doctrine of non-taxability of the government.
c. No, violative of the inherent limitations.
d. No, violative of the constitutional limitations.
33. A tax imposed based on the number:
a. Income Tax
b. Specific Tax

c. Ad-valorem Tax
d. Customs Duties

34. One of the following statements is wrong. Identify. For a taxpayer who becomes
liable for the first time to the VAT:
a. There can be an input tax on purchases he made when not yet a VAT
taxpayer
b. He must use a VAT invoice on the sale of the goods purchased when not yet a
VAT taxpayer
c. He must still use the Non-VAT invoice in use when he was not yet a VAT
taxpayer on the sale of goods on hand on the transition date
d. There will be an adjustment on the inventory valuation on the transition date
35. Mitch Inc., a Philippine Corporation, sold through the local stock exchange
10,000 Globe shares that it brought 2 years ago. Mitch sold the shares for
P2,000,000 and realized a net gain of P200,000. How much shall it pay tax on the
transaction?
a. It shall declare a P2,000,000 gross income in its income tax return, deducting
the cost of acquisition as an expense.
b. It shall report the P200,000 in its corporate income tax return adjusted by the
holding period.
c. It shall pay 5% tax on the first P100,000 of the P200,000 and 10% tax on the
remaining P100,000.
d. It shall pay a tax of one-half of 1% if the P2,000,000 gross sales.

36. Butt, VAT registered, made the following purchases during the month of
January , 2016:
Goods for sale, inclusive of VAT
P246,400
Supplies, exclusive of VAT
20,000
Office air-conditioner, total invoice price
(estimated life is 3 years)
56,000
Home appliance for residence, gross of VAT
17,920
Service for store repair, contractor not VAT registered,
total invoice amount
33,000
Service for repainting of store, total invoice amount
evidenced by ordinary receipt issued by contractor
4,480
How much was the total allowable input taxes of Butt for the month using 12% VAT
rate?
a. P38,688
c. P34,800
b. P35,337.60
d. P34,542.86
37. Which of the following statements is incorrect?
a. A zero-rated sale of goods or properties (by a VAT-registered person) is a
taxable transaction for VAT purposes, but shall not result in any output tax
b. The input tax on purchase of goods, properties or services, related to zerorated sales, shall be available as tax credit only in accordance with the
Regulations.
c. The input tax on purchases of goods, properties or services, related to such
zero-rated sale, shall be available as tax credit or refund in accordance with
the Regulations.
d. Any enterprise whose export sales exceeds 70% of the total annual
production of the preceding taxable year shall be considered an exportoriented enterprise.

38. In Computing the percentage tax on domestic carriers and keepers of garage,
which of the following shall be considered an incorrect minimum quarterly gross
receipt?
a. Jeepney for hire, Manila and other cities P65,700
b. Jeepney for hire, provincial P32,900
c. Taxis, Manila and other cities P98,600
d. Taxis, provincial P49,300
39. Mrs. Pina Tay a non-resident, not citizen of the Philippines, single, who died with
a gross estate in the Philippines of P4,000,000 and outside the Philippines of
P6,000,000. He left the following obligations and charges:
Medical expenses, Philippines, in the year of death
P1,000,000
Funeral expenses, foreign
800,000
Claims against insolvent person, Philippines
250,000
Judicial expenses of testamentary proceedings, Philippines
300,000
Judicial expenses of testamentary proceedings, foreign
350,000
Other claims against the estate, Philippines
900,000
Transfer to the Philippine Government, for public use of property in the
foreign country
400,000
Unpaid taxes, foreign country
20,000

Mortgage payable, foreign country

180,000
Losses, Philippines

100,000

Deduction from the Philippine gross estate is

a. P1,250,000
b. P1,550,000

c. P1,760,000
d. P1,160,000

40. When is the tax on horse race winnings under Section 126 payable?
a. Thirty (30) days after the end of the month
b. Twenty (20) days after the end of the month
c. Twenty (20) days from the date the tax was deducted and withheld
d. Five (5) days after the end of the quarter

_fin_