COMPREHENSIVE EXAMINATIONS

TAXATION

1. Which is not a source of tax law?

a. Judicial Decisions c. Revenue Regulations
b. Tax Treatises and Ordinances d. Opinions of tax experts
2. When tax is collected upon someone who is effectively reimbursed by another, the tax is
regarded as:
a. Direct b. Indirect c. Personal d. Business
3. Which is not a nature of tax
a. Enforced Proportional contribution
b. Enforced within the territorial jurisdiction of the taxing authority
c. Levied by the lawmaking body that can be generally delegated
d. General payable in money
4. Which is not an ad valorem tax?
a. Real property tax c. Income tax
b. Excise tax on cigar d. Donor’s tax
5. Which is a local tax?
a. Professional tax c. Excise tax
b. Documentary Stamp tax d. Donor’s tax
6. Tax rulings are issued by the:
a. Supreme Court c. Commissioner on Internal Revenue
b. Court of Tax Appeals d. Secretary of Finance
7. Which issues Revenue Regulations (RR)?
a. Commissioner of Internal Revenue c. Congress
b. Department of Finance d. President
8. Sale is a type of transfer referred to as:
a. Onerous c. Analogous
b. Gratuitous d. Superfluous
9. When the estate is settled judicially it is treated as an individual taxpayer
When the trust is irrevocable, the grantor is taxable
a. True, True b. True, False c. False, True d. False, False
10. All are the characteristics of the power of taxation, except:
a. An inherent power c. Civil in nature
b. Legislative in character d. Subject to inherent & constitutional limitations
11. Our tax laws are:
a. Political in nature b. Civil in nature c. Penal in nature d. Social in nature
12. Also known as tax administration:
a. Collection of taxes c. Levying of taxes
b. Payment of taxes d. Incidence of taxation
13. Taxation is an inherent power because:
a. It is the life blood of the government
b. Protection and benefit theory
c. It co-exists with the existence of the state
d. It is exercised for the general welfare of the people
14. All are essential characteristics of a tax, except:
a. It is an enforced contribution c. It is generally payable in money
b. It is generally unlimited in amount d. It is a proportionate burden
15. A tax is invalid in the following cases, except:
a. Theory of taxation and its purpose are disregarded
b. Basis of taxation is not recognized
c. Inherent and constitutional limitations are not observed
d. It results to double taxation
16. All are secondary purposes of taxation, except:
a. Sumptuary purpose c. Regulatory purpose
b. Compensatory purpose d. Revenue purpose
17. In the absence of inherent and constitutional limitations, the power of tax is:
 a. Comprehensive, unlimited and plenary c. Unlimited and plenary
b. Broad and penal d. Unlimited and political
18. All are similarities of taxation, police power, and eminent domain, except:
a. All are necessary attributes of the constitution
b. All exist independently of the constitution
c. All contemplate an equivalent benefit
d. All are superior to the non-impairment clause of the constitution
19. Below are characteristics of a sound taxation system, except:
a. Administrative Feasibility c. Uniformity of Taxation
b. Fiscal Adequacy d. Theoretical Justice
20. It refers to a fraudulent act of minimizing taxes:
a. Tax Avoidance b. Tax Dodging c. Tax Minimization d. Tax
Exemption
21. One of the following is not an inherent limitation of taxation:
a. Taxes must be for public purpose c. Territoriality rule
b. Equality in taxation d. Exemption of the government
from taxation
22. All of the following are exceptions to the territoriality doctrine, which is not:
a. In case of taxation of non-residents and/or citizens of the Philippines
b. If provided under a treaty obligation
c. In case of international comity
d. In case of international organizations
23. Taxation is equitable in all of the following, except:
a. Its burden falls on those better to pay c. It is based on uniformity rule
b. It is based on ability to pay d. It is based on benefits received
24. The only tax where non-payment of which will not result to imprisonment
a. Excise tax b. Donor’s tax c. Personal tax d. Property tax
25. Imposed to regulate conduct as a sanction
a. Tax b. Toll c. Penalty d. License Fee
26. An Ad Valorem tax:
a. Real Estate tax b. Income tax c. Excise tax on wine d. Excise tax on cigar
27. One of the following is not a source of our tax laws:
a. Administrative rulings and opinions c. 1987 Constitution
b. Judicial decisions d. Expert opinions on taxation
28. The government may not do all, except one:
a. Tax itself c. Delegate its power to tax to private
agencies
b. Imposed tax arbitrarily d. Disregard uniformity in taxation
29. A form of tax escape through which one is given tax immunity wherein others are
subjected to tax:
a. Shifting b. Tax Immunity c. Tax Exemption d. Tax Avoidance
30. A form of tax escape by a manufacturer or producer who improves his proceeds of
production thereby minimizing his unit production cost.
a. Tax Avoidance b. Capitalization c. Transformation d. Shifting
31. A waiver by the government’s right to collect tax
a. Tax Exemption b. Tax Amnesty c. Tax Avoidance d. Tax
Condonation
32. The theory which most justifies the necessity of taxation:
a. Protection and benefits theory c. Revenue purpose theory
b. Lifeblood theory d. Ability to pay theory
33. One of the characteristics of internal revenue laws is that these are:
a. Cannot be changed c. Political in nature
b. Penal in nature d. Generally prospective in application
34. The following are similarities of the inherent power of taxation, eminent domain, and
police power, except one:
a. Are necessary attributes of sovereignty
b. Interfere with private rights and property
 c. Superior to the non-impairment clause
d. Are legislative in character
35. In case of conflict between the tax code and GAAP:
a. Both tax code & GAAP shall be enforced c. Tax code shall prevail over GAAP
b. GAAP shall prevail over tax code d. The issue shall be resolved by the
Courts
36. Which statement refers to police power as distinguished from taxation
a. It can only be imposed on specific property
b. The amount imposed depends on whether the activity is useful or not
c. It involves the taking of property by the government
d. The amount imposed has no limit
37. Our taw laws are both:
a. Progressive and prospective c. Penal and regulatory
b. Civil and prospective d. Personal and regulatory
38. All are indirect constitutional limitations, except:
a. Non-imprisonment for non-payment of a poll tax
b. Due process clause
c. Equal protection clause
d. Religious freedom
39. All are sources of Public revenues, except:
a. Grants and Foreign Aids c. Commercial revenues
b. Administrative revenues d. Taxes and Tithes
40. Also known as tax administration
a. Collection of taxes c. Payment of taxes
b. Levying of taxes d. Incidence of taxation
41. A tax must be imposed for public purpose. Which of the following is not a public
purpose?
a. National defense
b. Public education
c. Improvement of the sugar and coconut industries.
d. Improvement of a subdivision road.
42. Special assessment is an enforced proportional contribution from owners of land
especially benefited by public improvement. Which one of the following is not
considered as one of its characteristics?
a. It is levied on land.
b. It is based on the government’s need of money to support its legitimate objectives.
c. It is not a personal liability of the persons assessed.
d. It is based solely on the benefit derived by the owners of the land.
43. As to scope of the legislative power to tax, which is not correct?
a. Where there are no constitutional restrictions, and provided the subjects are within the
territorial jurisdiction of the state, Congress has unlimited discretion as to the persons,
property or occupations to be taxed.
b. In the absence of any constitutional prohibition, Congress has the right to levy a tax
of any amount it sees fit.
c. The discretion of Congress in imposing taxes extends to the mode, method or kind of
tax, unless restricted by the constitution.
d. The sole arbiter of the purpose or which taxes shall be levied is Congress, provided
the purpose is public and the courts may not review the levy of the tax to determine
whether or not the purpose is public.
44. Which of the following is not a determinant of the place of taxation?
a. Source of the income c. Citizenship of the taxpayer
b. Amount of tax to be imposed d. Residence of the taxpayer
45. Statement 1 – The point on which tax is originally imposed is impact of taxation.
Statement 2 – Eminent domain is inferior to non-impairment clause of the constitution.
Statement 3 – As a rule, taxes are subject to set-off or compensation.
Statement 4 – As a rule, provisions on the validity of tax exemptions are resolved
liberally
 in favor of the taxpayer.

Statement 1 Statement 2 Statement 3 Statement 4

a. True False False True
b. False True True False
c. True True False False
d. False False True True
46. This is a constitutional limitation on the power of taxation.
a. Tax laws must be applied within the territorial jurisdiction of the state.
b. Exemption of government agencies and instrumentalities from taxation.
c. No appropriation of public money for religious purposes.
d. Power to tax cannot be delegated to private persons or entities.
47. The tax imposed should be proportionate to the taxpayer’s ability to pay.
a. Fiscal adequacy c. Administrative feasibility
b. Equality or theoretical justice d. Intellectual sensitivity
48. The tax laws must be capable of convenient, just and effective administration.
a. Fiscal adequacy c. Administrative feasibility
b. Equality or theoretical justice d. Intellectual sensitivity
49. Persons or things belonging to the same class shall be taxed at the same rate.
a. Simplicity in taxation c. Equality in taxation
b. Reciprocity in taxation d. Uniformity in taxation
50. The following are instances that short accounting period may be allowed, except:
a. Newly commenced business
b. Change of accounting period by individual taxpayers
c. Death of the taxpayer
d. Dissolution of business.

51. Which among the following is an example of an active income:

a. Professional Income c. Interest income from deposits
b. Prizes and winnings d. Dividends from domestic
corporations

52. The calendar year shall be used when the:

a. Taxpayer is going out of business c. Taxpayer has an annual accounting period
b. Taxpayer keeps its books of account d. Taxpayer is a resident citizen

53. Which is a capital asset:

a. Real property used in business
b. Personal property used in business
c. Real property not used in business
d. Any property, real or personal, not used in business.

54. Which of the following accounting methods is most consistent with the lifeblood
doctrine?
a. Accrual Method c. Installment Method
b. Cash Basis d. Deferred Payment Method

55. All of the following shall be displayed within the place of business; except:
a. Payment Form c. Barangay Clearance
b. Certificate of Accreditation d. “Ask for Receipt” Signage

56. A Mayor’s permit obtained this month shall be valid:

a. For 1 year from the date issued c. Until December 31 of this year
b. For 1 year from the date approved d. Until December 31 of next year

57. A person with three (3) businesses under its name has _________ TIN/s
a. One c. Illegal
 b. Three d. Cannot explain

58. A person can earn active income through the following, except:
a. Being an Employee c. Being an author of a book
b. Establishing a Business d. Practicing a Profession

59. Which among the following distinguishes an estate tax from other kinds of taxes that are
presently imposed under the provision of the NIRC of 1997?
A. It is a tax imposed on the privilege to transfer property ownership.
B. It is a tax imposed upon gratuitous transfers.
C. It is a tax imposed upon the net value of the properties that are transferred.
D. it is the tax that is imposed only upon the death of a person.

60. In a transfer in contemplation of death, revocable transfer and transfer under a general
power of appointment, there are rules to observe to determine what amount to include in
the gross estate, which is not a rule to observe?
A. If there was no consideration received on the transfer as in donation inter-vivos, the value
to include in the gross estate shall be the fair market value of the property at the time of
transfer
B. If transfer was in the nature of a bona fide sale for an adequate and full consideration in
money or money’s worth, no value shall be included in the gross estate
C. If there was no consideration received on the transfer as in donation mortis causa, the value
to include in the gross estate shall be the fair market value of the property at the time of the
decedent’s death
D. If the consideration received on the transfer was less than adequate and full, the value to
include in the gross estate shall be excess of the fair market value of the property at the
time of the decedent’s death over the consideration received

61. The following are requisites for vanishing deductions to be allowable, except one
A. The property must have formed part of the gross estate situated in the Philippines of the
prior decedent
B. The estate tax of the prior succession must have been finally determined
C. The present decedent died within five (5) years from the date of the death of the decedent;
D. The property with respect to which deduction is sought can be identified;

62. I. Unpaid mortgage indebtedness is deductible from the gross estate provided the said
property subject to the indebtedness is included in the gross estate, net of the mortgage
indebtedness.
II. A donation inter vivos by the decedent to the Philippine government few months
before his death is a deduction from the gross estate
A. False, false C. True, false
B. False, true D. True, True

63. The following are the requisites in order that claims against the decedent's estate may be
deductible, except:
A. They must be enforced by the claimants
B. They must be reasonably certain as to amounts
C. They must be existing against the estate
D. They must have been prescribed

64. The proceeds of life insurance is to be included as part of the gross estate of the decedent
insured:
A. when the irrevocable beneficiary predeceased the insured decedent
B. when the beneficiary is irrevocable
C. when the beneficiary is instructed to use the proceeds to pay off the debts of the decedent
D. when the beneficiary of the estate is the estate itself with instructions directed that the
proceeds be used only to settle the estate
 65. X, an American citizen, who is a permanent resident of the Phil. died while on a vacation
in his place of birth in the United States. Which one of the ff is a valid deduction from his
gross estate?
A. Estate taxes paid in the Phil.
B. Income tax paid on income earned and received after X’s death.
C. Unpaid income taxes on salaries received by X before his death.
D. Real property taxes on X’s Quezon City condominium due after his death.

66. Which of the following is not an exclusion from the gross estate?
A. Proceeds of life insurance
B. Transfer to Government
C. Transfer passing under a special power of appointment
D. Foreign Corporation shares of stock where 80% of its operation is in the Philippines
owned by a non-resident alien resident

67. A non-stock nonprofit entity shuts down and transfers all its property in favor of another
entity will not be subject to tax if it meets the requirements of the law, except?
A. The transferee is another non-stock non-profit organization
B. Not more than 30% of the donation is used for administrative purpose
C. The transferee is a educational, charitable, religious, cultural or social welfare,
philanthropic organization.
D. The transferee is a non-government organization.

68. Transfer tax is a tax imposed on the privilege to transfer property ownership
A. through a will C. inter vivos
B. mortis causa D. gratuitously

69. I. In all cases, void donations are not subject to donors tax.
II. Every donation between the spouses during the marriage shall be void.
A. Both statements are true
B. First statement is true while second statement is false
C. Both statements are false
D. First statement is false while the second statement is true

70. Exempted from donors taxation are gifts made

A. in consideration of marriage.
B. to a school which is a stock corporation.
C. to a for-profit government corporation.
D. for the use of the barangay.

71. I. For the purpose of donors tax, second degree cousins are strangers to each other.
II. Encumbrance of the property donated, if assumed by the donor is deductible for the donors
tax purposes.
A. False, True
B. False, False
C. True, True
D. True, False

72. Which of the following statement is incorrect?

A. The government is not legally bound by the agreement between the donor and the donee
that the later shall pay the donors tax instead of the former.
B. Only one return shall be filed for several gift or donations by a donor to the different
donees on the same date.
C. A separate return shall be filed by each donor for each gift or donation made on different
dates during the year reflecting therein any previous net gift made in the same calendar
year.
D. When a donors tax return was filed and it was found out by the BIR to have errors which
gave rise to a deficiency donors tax, the donor cannot be required to pay the deficiency.

73. Filing of the donors tax for a donation of real property which is subject to the donors tax
shall be done within:
A. 30 days from the acceptance of the donation in writing by the donee
B. 30 days from the notarization of the donation document
C. 30 days from the grant of the donation by the donor
D. 30 days from the transfer of title of the real property.

74. I. In all cases, void donations are not subject to donors tax.
II. Every donation between the spouses during the marriage shall be void.
A. Both statements are true
B. First statement is true while second statement is false
C. Both statements are false
D. First statement is false while the second statement is true

75. Illegal condition/ consideration will result to nullity of the contract of donation?
A. No, if the condition/ consideration had not been fulfilled yet
B. Yes, because the contract shall be contrary to law
C. No, because it is a solemn vinculum that binds the parties
D. No, because it will violate the constitutional rights of the parties

76. The following are the requisites of a donation for purposes of the donor's tax, except one:
A. Capacity of the donor
B. Donative intent
C. Capacity of the donee
D. Delivery of the subject matter of gift

77. Which of the following statement is incorrect?

A. Only one return shall be filed for several gift or donations by a donor to the different
donees on the same date.
B. When a donors tax return was filed and it was found out by the BIR to have errors which
gave rise to a deficiency donors tax, the donor cannot be required to pay the deficiency.
C. The government is not legally bound by the agreement between the donor and the donee
that the later shall pay the donors tax instead of the former.
D. A separate return shall be filed by each donor for each gift or donation made on different
dates during the year reflecting therein any previous net gift made in the same calendar
year.

78. A, donated a parcel of land to the unborn child of H and W. Is the donation valid?
A. No, because there is no one yet to accept the donation
B. No, because the donee has no name yet to whom the land is to be transferred
C. No, because there is no donee yet
D. Yes, provided the child be born alive or to live for at least 24 hours under certain
conditions

79. Levox Corporation wanted to donate P5 million as prize money for the world
professional billiard championship to be held in the Philippines. Since the Billiard Sports
Confederation of the Philippines does not recognize the event, it was held under the
auspices of the International Professional Billiards Association, Inc. Is Levox subject to
the donor's tax on its donation?
A. No, because it is donated as prize for an international competition under the billiards
association.
B. No, so long as the donated money goes directly to the winners and not through the
association.
C. Yes, since the national sports association for billiards does not sanction the event.
D. Yes, but only that part that exceeds the first P100,000.00 of total Levox donations for the
calendar year.

80. Which among the ff is subject to the payment of donor’s tax?

A. a general renunciation of a surviving spouse in his/her share in the inheritance of the
deceased spouse.
B. a general renunciation by the surviving spouse of his/her share in the conjugal partnership
of gains upon its liquidation as a result of the death of the other spouses.
C. a remuneratory donation where there is a legally demandable obligation.
D. donation made outside the Phil. by a non-resident alien of property located outside the Phil.