CARD-MRI Development Institute, Inc.

Purok Lemonsito, Brgy. Mankilam, Tagum City

Subject: Income Taxation

Prelim Examination

NAME: ________________________ DATE: ______________ Score:

SECTION: _____________________ TEACHER: ______________________ 60
General Instructions: Select the correct answer for each of the questions. STRICTLY NO ERASURES
ALLOWED.

Test I. MULTIPLE CHOICE. Encircle the letter that corresponds to the correct answer. [1 point each]
1. It refers to the inherent power of the state b. Assets
to legislate for the protection of health, c. Personal property
welfare and morals of the community. d. Real Property
a. Police Power 6. These are immovable properties such as
b. Eminent Domain Power land and buildings.
c. Taxation Power a. Just Compensation
d. Sovereignty b. Assets
2. It refers to the inherent power of the state c. Personal property
to take private property for public purpose. d. Real Property
a. Police Power 7. These are movable properties such as car
b. Eminent Domain Power and other personal belongings.
c. Taxation Power a. Just Compensation
d. Sovereignty b. Assets
3. It is an attribute of sovereignty that is c. Personal property
exercised by the government for the d. Real Property
betterment of the people within its 8.Properties which may be felt or touched
jurisdiction whose interest should be served, and are necessarily corporeal, either real or
enhanced and protected. personal properties.
a. Police Power a. Just Compensation
b. Eminent Domain Power b. Intangible
c. Taxation Power c. Tangible
d. Sovereignty d. Real Property
4. It is very important for the continuous 9. Properties that are “rights” rather than
existence of a nation. It is the primary source physical objects. Examples are patents,
of government revenue that is used to stocks and franchises.
effectively and permanently perform a. Just Compensation
government functions. b. Intangible
a. Taxation c. Tangible
b. Accounting d. Real Property
c. Sovereign 10. It refers to individual taxpayers.
d. Patriotism a. natural person
5. It means paying the owner the full b. juridical person
monetary equivalent of the property taken for c. taxpayer
public use. d. civilian
a. Just Compensation

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Purok Lemonsito, Brgy. Mankilam, Tagum City

11. It includes corporations, partnerships and any d. Tax evasion

association. 19. The following are principles of a sound tax
a. natural person system, EXCEPT:
b. juridical person a. administrative feasibility
c. taxpayer b. equality or theoretical justice
d. civilian c. fiscal adequacy
12. Which of these is a responsibility of the d. assessment
legislative branch of the government? 20. Its purpose is to minimize tax.
a. makes tax laws a. Overstatement of expenses
b. carries out tax laws b. Tax avoidance
c. evaluates tax laws c. Tax dodging
d. grant tax laws d. Tax evasion
13. Which of these is a responsibility of the 21. Its purpose is to avoid paying taxes.
executive branch of the government? a. Overstatement of expenses
a. makes tax laws b. Tax avoidance
b. carries out tax laws c. Tax dodging
c. evaluates tax laws d. Tax evasion
d. grant tax laws 22. Which of the following defines the country’s
14. Which of these is a responsibility of the tax policies?
judicial branch of the government? a. Philippine Constitution
a. makes tax laws b. Pari Materia Principle
b. carries out tax laws c. Tax Transformation
c. evaluates tax laws d. National Internal Revenue law
d. grant tax laws 23. Which of the following statements is/are
15. All of the following are true, EXCEPT: correct?
a. Tax evasion is valid i. Taxation is a process
b. Levy is the first step of the Taxation process ii. Enactment of Tax Laws is part of the taxation
c. Payment of tax is also called “tax collection” process.
d. Tax avoidance is also called as "Tax iii. The constitution expressly conferred the
Minimization" power of taxation to the president of the
16. The following are examples of tax evasion, Philippines
EXCEPT: iv. Taxation requires voluntary contribution from
a. Understatement of Sales inhabitants to support the government.
b. Overstating the Expenses a. i, ii, iii and iv
c. Fabricating the Expenses b. i, ii, and iii only
d. Tax Option c. i and ii only
17. The following are examples of tax d. i only
minimization, EXCEPT: 24. Which of the following statements is/are
a. Fabricating Income Statement natural qualities of Taxation Power?
b. Tax Option i. An inherent power
c. Shifting ii. Essentially and executive function
d. Tax Exemption iii. An absolute power
18. Which of the following tax escape is iv. Territorial in operation
permissible under Tax Code? a. i and iv only
a. Overstatement of expenses b. ii, and iii only
b. Tax avoidance c. i and ii only
c. Tax dodging d. i only

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 CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City

25. Statement 1: Income refers to all earnings c. Health

derived from service rendered (labor), from d. House and Lot
capital (business or investment), or both, 30. Which is not a requisite of gross income?
including gain derived from sale or exchange of a. Return on Capital
personal or real property classified as either b. Realized benefit
ordinary or capital asset. c. Exempted by law
Statement 2: Return of capital happens when the
d. Not exempted by law
money you invested return to your pocket
31. Yuki, a resident alien, and Yuji, a non-
a. True, True
resident alien, executed a contract of sale in Japan
b. True, False
whereby Yuji shall purchase the lot owned by
c. False, True
Yuki in the Philippines. Yuki gains P1,000,000 in
d. False, False
26. Statement 1: Passive income is the value exchange. Which is true?
derived from an exercise of profession, business a. the gain is exempt since the gain is derived
or utilization of capital including profit or gain outside the Philippines.
derived from sale or conversion of assets. b. the gain is not subject to Philippine tax since
Statement 2: An income can be determined by Yuki is a resident alien
just receiving cash as a result of sales. c. the gain is subject to Philippine tax because
a. True, True Yuki is a resident alien
b. True, False d. the gain is subject to Philippine tax because
c. False, True the property is in the Philippines
d. False, False 32. Gains on the sale of goods manufactured and
27. Statement 1: A Filipino citizen or domestic sold by the taxpayer within the Philippine is
corporation whose income is derived within and subject to tax
without is generally not subject to tax. a. wherever sold
Statement 2: In general, when an income is b. if sold abroad only
earned partly from within and without, only c. without the Philippines only
income within is taxable in the Philippines, d. within the Philippines only
except if the taxpayer is a resident citizen or
33. Jam, a resident alien, bought a car
domestic corporation.
a. True, True manufactured in the Philippines and exported the
b. True, False same at a gain to Carla, a non-resident citizen.
c. False, True Which is correct?
d. False, False a. the gain is subject to tax in Philippines since
28. Statement 1: An income can be determined by the commodity involved is manufactured in the
just receiving cash as a result of sales. Philippines.
Statement 2: Examples of compensation income b. the gain is subject to tax in Philippines since
are interest, prizes and winnings. the buyer is a citizen of the Philippines.
a. True, True c. the gain is both subject to tax in the Philippines
b. True, False and abroad since the commodity involved is
c. False, True manufactured in the Philippines.
d. False, False d. the gain is taxable in the Philippines since it
29. When paid for, which of the following items is sold in the Philippines
may involve a return on capital? 34. Statement 1: Haley is an American Citizen,
a. Life currently living in US. She donated her condo
b. Dignity

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 CARD-MRI Development Institute, Inc.
Purok Lemonsito, Brgy. Mankilam, Tagum City

unit in Manila, Philippines to her sister-in-law. 39. Mr. Wil Daso, single, a resident alien,
The condo unit is non-taxable. reported the following sales for the
Statement 2: Ashley is a Filipino Citizen living in taxable year 2023:
Tagum, Davao del Norte. She works as an Ford Car, within P 450, 000
accountant in LGU. Her salary from the said Tesla Car, USA 550,000
entity is taxable Land, Makati 1,050, 000
a. True, True Land, USA 550, 000
b. True, False Condo unit, Pasay 3,000,000
c. False, True
How much is the total income subject to
d. False, False
income tax?
35. Statement 1: Daniel is an Irish Citizen,
a. 5,600, 000
currently living in Cebu, Philippines. He donated b. 4,500,000
a car located in Ireland to her sister-in-law. The c. 5,050,000
car is non-taxable. d. 5, 550,000
Statement 2: Madz is an American Citizen, 40. An individual income tax payer shall
currently living in the Philippines. She donated a file his or her income tax return on or
land located in Tagum, Davao del Norte to her before the
sister, Mandy. The land is non-taxable. a. 15th day of the fourth month of the
a. True, True same calendar year.
b. True, False b. 15th day of the fourth month of the
c. False, True following calendar year.
d. False, False c. 15th day of the fourth month of the
same fiscal year.
36. Daniel acquired a car for P600, 000 five years
d. a. 15th day of the fourth month of the
ago. The current value of his car right now is following fiscal year.
P360, 000. He sold his car for P400, 000. How 41. Statement 1: A calendar year covers
much is the return on capital? a period of 12 months which ends on the
a. 40,000 last day of any month other than
b. -200,000 December 31.
c. 240,000 Statement 2: The fist accounting period
d. 400,000 of a starting business will more likely be
37. which taxpayer is not a natural person? less than 12 months.
a. Resident citizen a. True, True
b. taxable estate b. True, False
c. Non-resident alien engaged in trade or business c. False, True
d. Non-resident alien not engaged in trade or d. False, False
business 42. Mrs. Valdez started business on July
38. A Filipino who has been abroad for more than 15, 2023. What should be the coverage of
183 days is classified as a her 2023 income tax return?
a. resident alien a. January 1 to July 15, 2023
b. non-resident alien b. July 15, 2023 -December 31, 2023
c. non-resident citizen c. July 16, 2023-July 15, 2024
d. non-resident citizen not engaged in trade or d. January 1 to December 31, 2023
business 43. Who is not a large taxpayer?
a. mining companies
b. listed companies

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Purok Lemonsito, Brgy. Mankilam, Tagum City

c. banks with P120M authorized capital c. non-resident alien engaged in trade or

d. none of these business
44. The principles of a sound tax system d. non-resident alien non engaged in
exclude trade or business
a. economy efficiency 51.A corporation incorporated according
b. fiscal adequacy to Philippine laws is a
c. theoretical justice a. Domestic corporation
d. administrative feasibility b. Resident corporation
45. Statement 1: Taxes are voluntary c. Non-resident corporation
contributions to the government d. De jure corporation
Statement 2: Taxes are mandatory 52. Which is taxable on world income?
contributions to the government. a. Resident corporation
a. True, True b. Non-resident citizen
b. True, False c. Resident Citizen
c. False, True d. Resident Alien
d. False, False 53. When tax is collected upon someone
46. Which is an indirect tax? who is effectively reimbursed by another,
a. income tax the tax is regarded as
b. donor’s tax a. direct
c. other percentage tax b. indirect
d. estate tax c. personal
47. Which is not an item of passive d. illegal
income? 54. Which is NOT a characteristic of tax?
a. Royalties a. it is an enforced contribution
b. Prizes b. it is generally payable in money
c. Deposit interest income c. it is subject to assignment
d. professional income d. it is levied by the law-making body of
48. Income is recognized when received the Senate having jurisdiction
rather than when earned 55. Tax as to incidence is classified as
a. Cash basis a. Fiscal or regulatory
b. Installment basis b. Direct or indirect tax
c. Accrual basis c. National or local tax
d. Deferred payment basis d. Specific or ad valorem tax
49. Income is recognized when earned 56. Which of the following is a local tax?
regardless of when received a. value added tax
a. Cash basis b. Real property tax
b. Installment basis c. documentary stamp tax
c. Accrual basis d. other percentage taxes
d. Deferred payment basis 57. As to subject matter, taxes do not
50. A Canadian who is staying in the include
Philippines for more than one year is a a. Property tax
a. resident alien b. Regulatory tax
b. non-resident alien c. Poll tax
d. Excise tax

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Purok Lemonsito, Brgy. Mankilam, Tagum City

58. All are ad valorem taxes, EXCEPT:

a. Poll tax
b. Estate Tax
c. Real Property Tax
d. Capital gains tax on real property
capital asset
59. Statement 1: There should be direct
receipt of benefit before one could be
compelled to pay taxes.
Statement 2: Taxes are the lifeblood of
the government.
a. True, True
b. True, False
c. False, True
d. False, False
60. Statement 1: Police power is the most
superior power of the government. Its
exercise needs to be sanctioned by the
Constitution.
Statement 2: The reciprocal duty of
support between the government and the
people underscores the basis of taxation.
a. True, True
b. True, False
c. False, True
d. False, False

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