Assessment No. 1 4.
Which theory of taxation states that
BTAX 223-1 without taxes, a government would
Fundamental of Taxation and the be paralyzed for lack of power to
Three Inherent Powers of the State activate and operate it, resulting in
its destruction?
a. Power to destroy theory
MULTIPLE CHOICE (20 Points) Choose the b. Lifeblood theory
letter of the correct answer. c. Sumptuary theory
d. Symbiotic theory
1. Money collected from taxation shall 5. The power to tax is the power to
not be paid to any dignitary EXCEPT destroy. Is this always so?
when a. No. The Executive branch may
a. the religious dignitary is assigned decide not to enforce a tax law
to the Philippine army. which it believes to be confiscatory.
b. it is paid by a local government b. Yes. The tax collectors should
unit. enforce a tax law even if it results to
c. the payment is passed in audit by the destruction of the property
the Commission on Audit (COA). rights of a taxpayer.
d. it is part of a lawmaker’s pork c. Yes. The law should always be
barrel. enforced because without taxes the
2. Anne Lapad Co, a student activist, very existence of the State is
wants to impugn the validity of a tax endangered.
on text messages. Aside from d. No. The Supreme Court may nullify
claiming that the law adversely a tax law, hence property rights are
affects her since she sends messages not affected.
by text, what may she alleged that 6. Under present law, a family with 6
would strengthen her claim to the children will have a maximum tax
right to file a taxpayer’s suit? exemption of
a. That she is entitled to the return of a. P200,000
the taxes collected from her in case b. P96,000
the court nullifies the tax measure. c. P150,000
b. That tax money is being extracted d. P300,000
and spent in violation of the 7. A resident Filipino citizen who
constitutionally guaranteed right to became an overseas contract worker
freedom of communication. (OCW) is taxed as follows
c. That she is filing the case in behalf a. Tax-exempt
of a substantial number of b. On income derived without the
taxpayers. Philippines only
d. That text messages are an c. On income derived within and
important part of the lives of the without the Philippines
people she represents. d. On income derived within the
3. Which statement below express the Philippines only
lifeblood theory? 8. The following may be considered De
a. The assessed taxes must be Minimis Benefits, except
enforced by the government. a. Laundry allowance
b. The underlying basis of taxation is b. Rice subsidy
government necessity, for without c. Expenses for foreign travel
taxation, a government can neither d. Medical benefits
exist nor endure. 9. The withholding tax system was
c. Taxation is an arbitrary method of devised for the following reasons
exaction by those who are in the except
seat of power. a. To provide the taxpayer a convenient
d. The power of taxation is an inherent manner to meet his probable income
power of the sovereign to impose tax liability
burdens upon subjects and objects b. To ensure the collection of the income
within its jurisdiction for the tax
purpose of raising revenues. c. To improve the government’s cash flow
d. To do away with the filing of income tax
returns
10. An exemption allowed to a of the beneficiary was irrevocable,
taxpayer that has qualified otherwise it need to be declared.
legitimate, and/or recognized or a. Both advises are correct
legally adopted children b. 1st advise is correct, 2nd advise is
a. Additional exemption wrong
b. Special additional personal exemption c. Both advises are wrong
c. Optional standard deduction d. 1st advise is wrong, 2nd advise is
d. Personal exemption correct
11. A feature of ordinary gains as 15. Gross income is reported
distinguished from capital gains. partially in each taxable year in
a. Gains from sales of assets not stock in proportion to collections made in
trade such period as it bears to the total
b. May or may not be taxable in full contract price refers to
c. Sources are capital assets a. Crop year basis method
d. No holding period b. Percentage of completion basis
12. The following except one, may method
claim personal exemptions c. Accrual method
a. Non-resident alien not engage in trade d. Installment sales method
or business in the Philippines 16. Schedular system of income
b. Non-resident alien engage in trade or taxation means
business in the Philippines a. All types of income are added
c. Resident alien together to arrive at gross income
d. Citizen b. Separate graduated rates are
13. Which of the following imposed on different types of
taxpayers whose personal income
exemption is subject to the law on c. Capital gains are excluded in
the reciprocity under the Tax Code? determining gross income
a. Non-resident citizen with respect to his d. Compensation income and
income derived outside the Philippines business professional income are
b. Non-resident alien who shall come to added together in arriving a gross
the Philippines and stay therein for an income
aggregate period more than 180 days 17. It is important to know the
c. Resident alien deriving income from a source of income for tax purposes
foreign country (i.e. from within or without the
d. Not resident alien not engage in trade Philippines) because
or business in the Philippines whose a. Some individual and corporate
country allows personal exemption to taxpayers are taxed on their
Filipinos who are not residing but are worldwide income while others are
deriving income from said country taxable only upon income from
14. The widow of your best friend sources within the Philippines
has just been paid P1,000,000 on b. The Philippines imposes income tax
account of life insurance policy of only on income from sources within
the decease husband. She asks you c. Some individual taxpayers are
whether she should declare the citizens while others are aliens
amount for income taxes purposes d. Export sales are not subject to
or for estate tax purposes. income tax
1st advise-The proceeds of life 18. In cases of deduction and
insurance paid to the beneficiary upon exemption on income tax returns
the death of the insured exempt from doubts shall be resolved
income tax and need not be declared a. Strictly against the taxpayer
for income tax purposes. b. Strictly against the government
2nd advise-The proceeds of life c. Liberally in favor of the taxpayer
insurance would have to be declared d. Liberally in favor of the employer
for the estate purposes the designation
Bachelor of Science in Bulacan Date Developed:
January 2021
Accounting Information Polytechnic Date Revised: Page 2 of 18
System College
Business Taxation- Developed by:
Document No. Revision #
BTax223 Eugene A. Ruano
19. The term capital assets
include
a. Stock in trade or other property
included in the taxpayer’s inventory
b. Real property not used in the trade
or business of taxpayer
c. Property primarily for sale to
customers in the ordinary course of
his trade or business
d. Property used in the trade or
business of the taxpayer and
subject to the depreciation
20. Lots being rented when
subsequently sold are classified as
a. Capital assets
b. Liquid assets
c. Ordinary assets
d. Fixed assets
Bachelor of Science in Bulacan Date Developed:
January 2021
Accounting Information Polytechnic Date Revised: Page 3 of 18
System College
Business Taxation- Developed by:
Document No. Revision #
BTax223 Eugene A. Ruano
