QUIZ 1 – INCOME TAXATION (CHAPTERS 1 & 3)

1. The point at which tax is levied is also called

a. Impact of taxation c. Incidence of taxation
b. Situs of taxation d. Assessment
2. Which is not an object of taxation?
a. Persons c. transactions
b. Business d. Public Properties
3. A. Taxation is the rule, exception is the exemption.
B. vague taxation laws are interpreted liberally in favor of the government
Which is false?
a. A only c. Both A and B
b. B only d. Neither A nor B
4. Statement 1: the benefit received theory presupposes that some taxpayers with the territorial jurisdiction of the
Philippines will be exempted from paying tax so long as they do not receive benefits from the government.

Statement 2: the ability to pay theory suggests that some taxpayers may be exempted from tax provided they do not
have the ability to pay the same.

Which statement is true?

a. Only statement 1 c. Both statements 1 and 2
b. Only statement 2 d. Neither statement 1 nor 2
5. Select the incorrect statement.
a. The power to tax includes the power to exempt.
b. Exemption is construed against the taxpayer and in favor of the government
c. Tax statutes are construed against the government in case of doubt.
d. Taxes should be collected only for public improvements.
6. Which limitation of taxation is the concept of “situs of taxation” based?
a. Territoriality c. International Comity
b. Public Purpose d. Exemption of the government
7. What is the basis of taxation?
a. Reciprocal duties of support and protection
b. Constitutionality
c. Public purpose
d. Necessity
8. What is the primary purpose of taxation?
a. To enforce contribution from its subject for public purpose
b. To raise revenue
c. To achieve economic and social stability
d. To regulate the conduct of business or profession
9. That all taxable articles or properties of the same class shall be taxed at the same rate underscores
a. Equality in taxation c. Uniformity in taxation
b. Equity of taxation d. None of these
10. The total consideration received from the sale of service constitute
a. Return on capital c. Either a or b
b. Return of capital d. Both a and b
11. The total consideration received from the sale of goods at a gain represents
a. Return on capital c. Either a or b
b. Return of capital d. Both a and b
12. Which is subject to income tax?
a. Proceeds of life insurance policy received by the family of the insured.
b. Excess of proceeds over the premium paid received by the taxpayer
c. Life insurance proceeds received by the corporation from the insurance of a deceased officer
d. None of these
13. Which of the following constitutes taxable income?
a. Return of premium on life insurance received by the insured.
b. Moral damages received from slander
c. Proceeds of crop insurance
d. Compensation for personal injury
14. Which of the following is not a constructive receipt of income?
a. Forgiveness of indebtedness in consideration of service
b. Matured detachable interest coupons
c. Deposit of income to taxpayer’s bank accounts
d. Cash salary of an employee
15. A Filipino who has been abroad for more than 183 days is classified as a
a. Resident alien c. Non-resident citizen
b. Non-resident alien d. Non-resident citizen not engaged in trade or business
16. An American who showed proof to the satisfaction of the Commissioner of Internal Revenue of his intention to stay in
the Philippines as an immigrant is classified as a
a. Resident citizen c. NRA-ETB
b. Resident alien d. NRA-NETB
17. A foreign corporation which is not authorized to conduct business in the Philippines is a
a. Domestic corporation c. Non-resident corporation
b. Resident corporation d. De jure corporation
 18. A foreign corporation which operates a branch in the Philippines is a
a. Domestic corporation c. Non-resident corporation
b. Resident corporation d. De jure corporation
19. Which is required to pay income tax?
a. Revocable trusts c. Co-ownership
b. Estates under extrajudicial settlement d. Business partnership
20. Rica paid P20,000 annual premium on a life insurance contract which would pay her P1,000,000 in case of her death.
After paying for 4 years, Rica assigned the policy to Carlos for P120,000. Compute the return on capital
a. P120,000 c. P40,000
b. P80,000 d. P0
21. Andrew received a total sum of P42,000 from his employer consisting of the following:
• P5,000 reimbursements for employer’s expenses paid by Andrew
• P15,000 payment of Andrew’s computer set purchased by the employer
• P22,000 monthly salary
Andrew’s computer set cost him P12,000. Compute the total return on capital which can be subjected to income tax?
a. P42,000 c. P25,000
b. P37,000 d. P22,000

For numbers 22-25:

Sarah has the following items of income:
Philippines Abroad
Business income P 200,000 P 100,000
Professional fees 100,000 50,000
Compensation income 400,000 -
Rent income 300,000 200,000
Interest income 30,000 40,000

22. Assuming Sarah is a resident citizen, compute the total income subject to Philippine income tax.
a. P1,390,000 c. P1,030,000
b. P1,180,000 d. P1,420,000
23. Assuming Sarah is a resident alien, compute the total income subject to Philippine income tax.
a. P1,420,000 c. P1,030,000
b. P1,180,000 d. P390,000
24. Assuming Sarah is a resident corporation, compute the total income subject to Philippine income tax
a. P1,420,000 c. P1,180,000
b. P1,030,000 d. P1,420,000
25. Assuming Sarah is a domestic corporation, compute the total income subject to Philippine income tax
c. P390,000 c. P1,180,000
d. P1,030,000 d. P1,420,000

-end-

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