TAXATION LAW

I – MULTIPLE CHOICE. Read the questions carefully and encircle the letter of
your answer.
1. Taxation is the indispensable and inevitable price for civilized society; without
taxes, the government would be paralyzed for lack of motive power to activate and
operate it.

a. Lifeblood theory
b. Necessity theory
c. Benefits – protection theory
d. Reciprocity theory

2. Tax evasion and tax avoidance may be used interchangeably; they are both illegal
and subject to criminal or civil penalty accomplished by breaking the letter of the
law and almost always results in the absence of tax payments.

a. True
b. False
c. Maybe
d. I don’t know

3. Where there is a natural presumption that the taxpayer knows his tax obligations
under the law, mere reliance on another person in preparing, filing and paying
income taxes is not a justification for failure to file the right information on income
taxes.

a. Willful Blindness doctrine

b. Shifting doctrine
c. Accountability doctrine
d. Dependency doctrine

4. Who among the following may be taxed on their income from sources within and
without the Philippines?

a. Resident alien
b. Resident citizen
c. Non-resident alien engaged in trade or business
d. Non-resident alien not engaged in trade or business

5. Before the application of Republic Act No. 10963, taxable income, other than
passive income and capital gains, was subjected to graduated rates of ____ to
_____.

a. 20%; 30%
b. 20%; 35%
c. 5%; 35%
d. 5%; 30%

6. A. Minimum Corporate Income Tax or MCIT is imposed beginning on the 4 th

taxable year immediately following the second year in which such corporation
commenced its business operations.
B. MCIT is applicable only if the taxable income is zero or negative.
C. The MCIT is imposed on gross income which is arrived at by deducting the
capital spent by a corporation in the sale of its goods, the cost of goods and other
direct expenses from gross sales.
D. MCIT is not applicable if the domestic or foreign corporation is not subject to
NCIT.
Which of the following statements are true?
a. A and B only
b. C and D only
 c. A and C only
d. B and D only

7. Tax imposed upon the privilege of passing ownership of property without any
valuable consideration.

a. Disposition tax
b. Excise tax
c. Transfer tax
d. Passing tax

8. Under Republic Act No. 10963 or the TRAIN law, the standard deduction shall be
in the amount of _________ while the family home shall be in the amount of
_________.

a. P1,000,000; P1,000,000
b. P1,000,000; P5,000,000
c. P5,000,000; P10,000,000
d. P10,000,000; P10,000,000

9. Onerous donations are those subject to burdens, changes or future services equal
in value than that of the thing donated. Donations with an onerous cause shall be
governed by the rules on contracts and remuneratory donations as regards that
portion which exceeds the value of the burden imposed.

a. The 1st statement is true, while the 2nd statement is false

b. The 1st statement is false, while the 2nd statement is true
c. Both statements are true
d. Both statements are false

10. It is a tax on consumption levied on the sale, barter, barter, exchange or lease of
goods or properties and services in the Philippines and on importation of goods
into the Philippines.

a. Input tax
b. Output tax
c. Import tax
d. Value added tax

11. The following are considered VAT-exempt, except:

a. Persons not engaged in undertaking VAT-taxable transactions

b. Inventors
c. Cinema or theater operators
d. Importers

12. A _______ is in the nature of an excise tax levied on the exercise by persons of
certain privileges conferred by law for the creation, revision or termination of
specific legal relationships through the execution of specific instruments such as
leases of lands, mortgages, pledges and trust and conveyances of real property.

a. Privilege tax
b. Transaction tax
c. Stationary stamp tax
d. Documentary stamp tax

13. Which of the following is not a duty or power of the Bureau of Internal Revenue?

a. Assess and collect all national internal revenue taxes, fees, and charges
b. Enforce all forfeitures, penalties, and fines connected with the assessment
and collection of taxes, fees and charges
 c. Execute judgement in all cases decided in its favor by the Court of Tax
Appeals and the ordinary courts
d. Issue letters of authority for the examination of taxpayers within the different
regions in the Philippines

14. The following have the authority to make arrests and seizures for the violation of
penal law and rules or regulation administered by the BIR, except:

a. Commission of Internal Revenue

b. Revenue regional officers
c. Internal revenue officers
d. Field officer

15. An individual not deriving compensation as an employee under an employer-

employee relationship but who is self-employed and deriving gross sales or
receipts not exceeding P100,000 in any 12-month period and whose activities
should be principally for subsistence or livelihood.

a. Minimum income earner

b. Low income earner
c. Minimal income earner
d. Marginal income earner

16. It contains wrong information due to mistake, carelessness or ignorance

a. Fraudulent return
b. Negligent return
c. False return
d. Superficial return

17. _________ gives notice to the taxpayer that it is under investigation for possible
deficiency tax assessment.

a. Letter of Conference
b. Letter of Assessment
c. Letter of Authority
d. Letter of Recommendation

18. In case of excess income tax payments, the corporation has an option of tax
credit or return. Another option given to corporations is for such excess payments
to be carried over and credited against the estimated quarterly income tax
liabilities for the taxable quarters of the succeeding taxable years.

a. The 1st statement is true, while the 2nd statement is false

b. The 1st statement is false, while the 2nd statement is true
c. Both statements are true
d. Both statements are false

19. The filing of a motion for reconsideration or new trial before the Court of Tax
Appeals Division is not necessary before filing an appeal before the CTA En Banc,
the failure to file such motion shall not be a ground for the dismissal of the appeal
before the CTA En Banc.

a. True
b. False
c. Maybe
d. I don’t know

20. Which of the following is not a burden of a taxpayer on appeal to the CTA?

a. To prove the tax assessment is wrong

 b. To appeal from an order file a bond to suspend tax collection during the
pendency of the appeal
c. To disclose that the tax assessment is merely a presumption and not based
on actual facts
d. To show the correct computation of liability, if any

21. The 30-day prescriptive period for appeal with the CTA runs from the date the
taxpayer receives the appealable decision or ________ after the lapse of the
________ within which the BIR should act

a. 30 days; 120 days

b. 30 days; 180 days
c. 15 days; 120 days
d. 15 days; 180 days

22. In order to raise revenue for the repair and maintenance of the newly improved
city hall of Corona, Mayor Analise Keating together with the sanggunian of the
LGU created an ordinance for the collection of P2.00 “escalator fee” every time a
person uses an escalator in the premises. Is this a valid imposition?

a. Yes, because the imposition of a tax, fee, charge or the generation of revenue
is exercised by the sanggunian of the LGU through an appropriate ordinance
b. No, because the collection of the fee will be too burdensome for the
constituents of Corona City
c. Yes, because the ordinance was created with the presence of the mayor of
the LGU
d. No, because it is not one of the taxes allowed by the national taxing body to
be collected by LGUs

23. A written protest must be filed within ________ from the receipt of notice of
assessment.

a. 60 days
b. 120 days
c. 15 days
d. 30 days

24. The price at which a property may be sold by a seller who is not compelled to sell
and bought by a buyer who is not compelled to buy.

a. Fair Market Value

b. Assessed Value
c. Zonal Value
d. Purchase Value

25. It is a list or schedule of articles on which a duty is imposed upon the importation
into the country, with the rates at which they are severally taxed.

a. Tariff
b. Customs duty
c. Imports
d. Foreign duty

26. A special duty imposed on the importation of a product, commodity or article of

commerce into the Philippines at less than its normal value when destined for
domestic consumption in the exporting country, which is difference between the
export price and the normal value of such product, commodity or article.

a. Anti-dumping duty
b. Countervailing duty
c. Ad valorem duty
 d. Specific duty

27. The Congress may, by law, authorize the President to fix within specified limits,
and subject to such limitations and restrictions as it may impose, tariff rates, import
and export quotas, tonnage and wharfage dues, and other duties or imposts within
the framework of the national development program of the government.

a. Flexible clause
b. Adjusting clause
c. Discretion clause
d. Imposition clause

28. Peso-for-peso reduction from a taxpayer’s tax liability, it is a direct subtraction

from the tax payable to the government.

a. Tax refund
b. Tax credit
c. Tax liability
d. Tax reserves

29. Income from long-term deposits or investments of 5 years or more are exempt
from interest income. However, if it is 4 to less than 5 years, for 3 to less than 4
years, or less than 3 years, then it shall be subjected to _____, ______ and
______ respectively.

a. 5%, 10%, 12%

b. 5%, 12%, 20%
c. 5%, 20%, 30%
d. 5%, 20%, 32%

30. Who among the following cannot claim tax credit?

a. Resident citizens
b. Domestic corporations including partnerships and general professional
partnerships
c. Beneficiaries of trusts and estates
d. Resident aliens, under the principle of reciprocity

II – ESSAY. Read the questions carefully and provide your answer with the proper
legal basis/bases; a mere “Yes” or “No” without further explanation will not be
given any credit. (5 points each)
1. Elena Bunotodas bought a residential house on June 30, 2010 for P1,500,000.
Said property became their family’s principal residence. On April 6, 2017 she was
promoted as General Manager of Matdaor Company and along with the
promotion came the necessity to move to a different province. The zonal value of
the property is P6,000,000, fair market value is valued at P3,000,000 as per the
tax declaration. Suppose Elena decides to sell it for P6,500,000, how much tax
would she have to pay?

2. Supahpapalicious Suave, a Filipino residing in Massachusetts died on May 24,

2012 due to complications after getting rhinoplasty. He left behind the following
properties to his wife Annebisyosa Batumbakal:
I. Family home in Ilocoslovakia City
II. A 600-square meter land in Massachusetts
III. Condominium unit in New York, Kabao City
IV. Mustang, black with plate number "ROVIXX 101”
The following are expenses that were paid:
I. Funeral expenses
II. Medical expenses
III. Judicial expenses
 a. What among the items aforementioned may be considered as part of the
gross estate of Supahpapalicious? How about deductions?
b. If he died on May 24, 2019, would your answer still be the same? Why or
why not?

3. Natalie Imbruhita leased a piece of land owned by the Municipality of San

Nyenyenye and built a Jollibee franchise on said property. The Municipal
assessor then assessed Natalie for real property taxes on the land, as well the
Jollibee building. Natalie refused to pay and questioned the validity of the
assessment. Natalie contends that since the property is owned by the
municipality, it is exempt from real property taxes and if not, she should not be
the one obligated to pay such since she merely leased it. Is Natalie’s contentions
correct?

4. Dominador Dominguez and Dominique Dominguez were married and had 3

children together named Domina, Domini and Dominea. Dominador died
intestate on September 30, 2012. In the settlement of the estate of Dominador,
Dominique renounced her inheritance in favor of Dominea, her youngest child,
because she felt that the latter needed it more as she was recently removed from
the employment force. The BIR assessed donor’s tax on Dominique but the latter
refrained from paying the same as she claims her renunciation is not subject to
donor’s tax. Was the BIR correct?