CPA REVIEW SCHOOL OF THE PHILIPINES

Manila

1.​ Royal Mining is a VAT-registered domestic mining entity. One of its products is gold being sold to
Bangko Sentral ng Pilipinas. It filed a claim with the BIR for tax refund on the ground that under
Section 106 of the NIRC, sales of precious metal to Bangko Sentral ng Pilipinas are considered export
sales subject to zero-rated VAT. Is Royal Mining’s claim for refund meritorious?
a.​ Yes, sale of precious gold to Bangko Sentral ng Pilipinas are deemed zero-rated transactions.
b.​ Yes, sale of precious gold to Bangko Sentral ng Pilipinas is deemed an export sale
hence, input thereon may be credited or refunded.
c.​ No, sale of gold to Bangko Sentral ng Pilipinas is exempt, hence, input is deemed
expense and cannot be refunded.
d.​ No, sale of gold to Bangko Sentral ng Pilipinas is vatable hence inputs are creditable not refundable.

2.​ Congress enacts a law imposing a 5% tax on gross receipts of common carriers. The law does not
define the term “gross receipts”. Express Transport, Inc., bus company plying the Manila Baguio
route, has time deposits with ABC Bank. In 2005, Express Transport earned P1 million interest, after
deducting the 20% final withholding tax from its time deposits with the bank. The BIR wants to
collect a 5 % gross receipts tax on the interest income of Express Transport without deducting the 20
% final withholding tax. Is the BIR correct?
a.​ Yes, gross receipts mean cash collected whether actually or constructively without any deductions.
b.​ Yes, gross receipts mean all cash collection actually received without any deductions.
c.​ No, gross receipts mean actual receipts after deducting withholding tax.
d.​ No, gross receipts mean actual receipts derived from actual business operation.

3.​ Lily’s Fashion, Inc. is a VAT-registered garment manufacturer located and registered as a Subic
Bay Freeport Enterprise under Republic Act No. 7227 and an exclusive exporter. During its
operations, it purchased various supplies and materials necessary in the conduct of its
manufacturing business. The suppliers of these goods shifted to Lily’s Fashion, Inc. the 12% VAT
on the purchased items amounting to P500,000.00.
What is the proper remedy of Lily’s Fashion Inc.?

a.​ Lily’s Fashion Inc., may use the P500,000 as tax credit;
b.​ Lily’s Fashion Inc., may ask for a refund of the P500,000;
c.​ Lily’s Fashion Inc., may convert the P500,000 into tax warrants;
d.​ Lily’s Fashion Inc., may charge it to cost or expense.

4.​ The Commissioner or his authorized representative is empowered to suspend the business
operations and temporarily close the business establishment of any person for:
a.​ Failure to issue receipts or invoices of a VAT-registered entity.
b.​ Failure to file a VAT-return for VAT-registered person as required by the tax code.
c.​ Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct
taxable sales or receipts for the taxable quarter
d.​ All of the above

5.​ 1st Statement: Excise taxes imposed and based on weight or volume capacity or any other
physical unit of measurement shall be referred to as ad valorem tax.

2nd Statement: Excise taxes imposed and based on selling price or other specified value of the good
shall be referred to as specific tax.

a.​ True; False​ c. False; True

b.​ True; True​ d. False; False

6.​ Mr. C is a manufacturer of fermented liquors. In making sales, all taxes on the products and
transactions are passed on to the buyers. For purposes of the value-added tax, which of the three
taxes mentioned here that forms part of the gross selling price?

a.​Excise tax​ c. Percentage tax

b.​Value-added tax​ d. None of the above

7.​ DST corporation bought a land at P56,000,000 using its original shares of stock as payment
thereof. How much documentary stamp tax will DST corporation pay if it was agreed that
Documentary Stamp Tax will be shouldered by DST corporation?
 a.​ P840,000
b.​ P560,000
c.​ P1,400,000
d.​ None of the above

8.​ Mr. Eugenio challenge the assessment of the BIR stating that he never received a copy of the
Letter of Authority from the BIR. The BIR proved that the security guard of Mr. Eugenio
received and acknowledged the receipt of the Letter of Authority by the BIR. Is the assessment
of the BIR valid?
a.​ No. The Letter of Authority must be served to Mr. Eugenio’s known business address and
in his absence to his clerk.
b.​ No. The Letter of Authority must be personally served to Mr. Eugenio.
c.​ Yes. The Letter of Authority is constructively served to Mr. Eugenio.
d.​ Yes. The Letter of Authority is properly served to Mr. Eugenio through his security guard.

9.​ Occupying the forefront of tax law enforcement is the:

a.​ Department of Finance
b.​ Bureau of Internal Revenue
c.​ Legislative Department
d.​ Executive Department

10.​CDE Corporation filed its income tax return for the calendar year 2023 on April 10, 2024. The
return was not false or fraudulent, the last day for the BIR to assess is
a.​ April 10, 2027​ c. April 10, 2029
b.​ April 15, 2027​ d. April 15, 2029

11.​ Using the preceding number, if assessment was made on April 10, 2027, the last day to collect is
a.​ April 10, 2030​ c. April 10, 2032
b.​ April 15, 2020​ d. April 15, 2032

12.​The Commissioner of Internal Revenue may compromise the payment of any internal
revenue tax when

I.​ A reasonable doubt as to the validity of the claim against the taxpayer exists

II.​ The tax or any portion thereof appears to be unjustly or excessively assessed.

III.​ The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.

a.​ I and II​ c. II and III

b.​ I and III​ d. I, II and III

13.​ The Commissioner of Internal Revenue may abate or cancel the tax liability when
I.​ The administration and collection costs involved do not justify the collection of the amount due
II.​ A reasonable doubt as to the validity of the claim against the taxpayer exists

III.​ The tax or any portion thereof appears to be unjustly or excessively assessed
IV.​ The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.

a.​Only I​ c. I and III

b.​ I and II​ d. I and IV

14.​The BIR terminate taxing period, EXCEPT?

a.​ When the taxpayer is retiring from business subject to tax;
b.​ When the taxpayer goes abroad;
c.​ When the taxpayer removes his property from Philippines;
d.​ When the taxpayer hides or conceals his property;
e.​ When the taxpayer performs any act tending to obstruct the proceeding for collection of taxes;
15.​The means employed in the assessment of taxes, EXCEPT?
a.​ Examination of tax returns (tax-audit);
b.​ Inventory taking surveillance and use of presumptions gross sales or receipts;
c.​ Prescribing and determining real property values;
d.​ Examination of bank deposits;
e.​ Requiring of additional documentary evidences
 16.​When is the last day to appeal a denial of the protest of the BIR with Court of Tax Appeals?
a.​ 30 days from its denial by BIR Commissioner.
b.​ After 30 days from the lapse 180 days decision period.
c.​ 30 days after lapse of 180-day decision period where no decision is forthcoming or 30 days from receipt of denial.
d.​ Taxpayers option either from 30 days from denial by the BIR commissioner or 30 days after lapse of 180 days decision
period whichever comes later.

17.​In filing a protest with the Bureau of Internal Revenue, what remedies may be availed by the taxpayer simultaneously?
a.​ Reinvestigation or abatement;
b.​ Reinvestigation or compromise;
c.​ Reinvestigation or reconsideration;
d.​ Reinvestigation or review.

18.​ What is the prescriptive period for a fraud assessment?

a.​ 5 years from discovery;
b.​ 10 years from discovery;
c.​ 5 years from date of the return or deadline prescribe by law whichever is later;
d.​ 10 years from date of the return or deadline prescribe by law whichever is later;

19.​Taxpayers are required to maintain records of its book of accounts from the time it filed its return pertaining to a taxable
period:
a.​ 3 years therefrom;
b.​ 5 years therefrom;
c.​ 10 years therefrom;
d.​ 15 years therefrom;

20.​Which of the following is not a proper way to deliver a final assessment notice?
a.​ Registered Mail;​ c. Substituted Service;
c. Electronic messaging;​ d. Personal Service.

21.​One of the following statements is false:

a.​ Estate tax is an excise tax.
b.​ Estate tax is a transfer tax on donation mortis causa.
c.​ The object of estate tax is to tax the property transferred from the dead to the living.
d.​ Estate tax is imposed to redistribute wealth.

22.​Which of the following is not an exempt acquisition and transmission?

a.​ The merger of usufruct in the owner of naked title:
b.​ The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicomissary;
c.​ The transmission from the first heir, legatee or donee in favor of another beneficiary, in accordance with the desire of the
predecessor;
d.​ Bequests, devices, legacies or transfer to social welfare, cultural and charitable institutions, no part of the net income of
which insures to the benefit of any individual.

23.​1st statement: Sale of shares of stock for less than adequate and full consideration may result in a donor’s tax and income tax.
2nd statement: A donation may be exempt from donor’s tax but not necessarily a deduction from the donor’s gross income.
a.​ Only the 1st statement is correct.
b.​ Only the second statement is correct.
c.​ Both statements are correct.
d.​ Both are incorrect.

24.​ Which does not belong to the group?

a.​ 5% gaming tax of Offshore Gaming Licensees
b.​ 12% VAT
6
c.​ /10 of 1% stock transaction tax on the selling price of domestic shares sold thru the stock exchange.
d.​ 6% CGT
25.​ Statement 1: Under the final withholding tax system, the amount of tax withheld is constituted as a full and final payment of the tax.
The payment thereof rests primarily on the payor of the income as withholding agent.
Statement 2: Under the creditable withholding tax system, the income recipient is not relieved from paying the tax based on the
pay-as-you-file system if the withholding agent either fails to withhold or withholds but does not remit the tax to the BIR.
a.​ Statement 1 is true.
b.​ Statement 2 is true.
c.​ Both statements are false.
d.​ Both statements are true.

26-28)
In 2023, Jerald Geneva, resident citizen, married, general manager of Atlasan Company, received the following from his employer –

Salary, net of WT of ₱46,560​

₱473,740 Allowances and benefits received:

(a)​ Rent paid by Atlasan on the house which

Jerald occupies for residential purposes,
net of WT of 5%​ 161,500

(b)​Entertainment allowance subject to

liquidation​ 100,000

Note: The amount of ₱75,250 was duly receipted in the name

of Atlasan, and used to entertain the clients of the
company. The balance of
₱24,750 was used to purchase an HD smart TV for the
personal use of Jerald’s family.

(c)​Reimbursement of entertainment expenses

paid by Jerald​ 40,000

Note: ₱16,500 was used to entertain Jerald’s family and

friends, and the balance of
₱23,500 was used to promote the company’s
business.

(d)​Fixed monthly allowance for entertainment

(₱5,000 x 12 months)​ 60,000

26.​ Compute the FBT of Jerald Geneva.

a.​ ₱ 65,692
b.​ ₱100,289
c.​ ₱113,750
d.​ ₱ 67,981

27.​ Compute the income tax payable in Jerald’s 2023 AITR.

a.​ ₱12,000
b.​ ₱40,000
c.​ ₱21,650
d.​ ₱0

28.​ What are the total allowable deductions of Atlasan Company?

a.​ ₱958,281
b.​ ₱903,221
c.​ ₱919,050
d.​ None of the above.
29-32)
Geraldine Montemayor, a resident citizen, a VAT-registered marketing professional offers her services to big clients in Metro Manila. For
the first 6 months of 2023, San Miguel Corporation, one of the biggest companies in the Philippines, availed of her services for ₱200,000
a month.
Additionally, she was an employee of IKBI Enterprises from January 1, 2023 to October 31, 2023. Beginning November 1, 2023, she
began her new employment with Nina Cao Company as head of marketing.
Geraldine provided you with the following documents in order for you to compute her income taxes:

(a)​ Form 2307 (1st and 2nd Q) from San Miguel Corporation
(b)​ Form 2316 from IKBI Enterprises
(c)​ Form 2316 from Nina Cao Company.

29.​Compute her 1st Quarterly income tax payable/(overpayment) if she chooses the OSD.
a.​ ₱(43,500)
b.​ ₱553,597
c.​ ₱ 16,500
d.​ None of the above.

30.​ Compute her 2nd Quarterly income tax payable/(overpayment).

a.​ ₱1,153,194
b.​ ₱​ 86,500
c.​ ₱ (33,500)
d.​ None of the above.

31.​Compute her 3rd Quarterly income tax payable/(overpayment).

a.​ ₱ 86,500
b.​ ₱ 16,500
c.​ ₱(33,500)
d.​ None of the above.

32.​Compute her annual income tax payable/(refundable).

a.​ ₱245,436
b.​ ₱413,811
c.​ ₱269,811
d.​ None of the above.

33.​After showing her your computations, she asked you if she could avail of the 8% tax instead. What would be your response?
a.​ Yes she can because her total revenues from her professional services do not exceed ₱3,000,000.
b.​ No. She cannot because she is VAT-registered.
c.​ It depends on what option she chose in the 1st Quarterly ITR.
d.​ None of the above

34. Statement 1: Revenue regulations (RRs) are issuances signed by the Secretary of Finance upon recommendation of the CIR.
Statement 2:Revenue memorandum circulars (RMCs) and revenue memorandum orders (RMOs) are issuances
signed by the CIR.
a.​ All are true.
b.​ All are false.
c.​ Only Statement 1 is true.
d.​ Only Statement 2 is true.
35. The following are establishments which grant sales discounts to senior citizens and PWDs on their sale of goods and/or services. Which is/are the
EXCEPTION(s)?

A.​Cinema houses​ C. Concert halls​ E. International airlines

B.​Residential unit lessor​ D. Funeral parlors

a.​ A and C
b.​ B and C
c.​ B and E
d.​ E only
e.​ None of
the above
36-37) Sagrado Realty sold a residential lot on January 1, 2022 for ₱9,000,000 exclusive of VAT. Down payment of ₱1,200,000 was received in 2022.
The balance will be collected in 4 equal instalments of ₱1,950,000 each in 2023, 2024, 2025, and 2026.The zonal value of the lot is ₱10,000,000 on
January 1, 2022.

36. Compute the output VAT for the year 2022.

a.​ 144,000
b.​ 120,000
c.​ 160,000
d.​ None of the above.

37. Compute the output VAT for the year 2026.

a.​ ₱244,000
b.​ ₱220,000
c.​ ₱260,000
d.​ None of the above.

38-39) The records of ABC Corporation, organized in 2007 showed the following data for 2017.
Gross Income P2,000,000
Less: Allowable business expenses (other than bad debts) P1,850,000
Bad debts written off 100,000 1,950,000
Taxable net income P 50,000

In 2018, 80% of the bad debts written off in 2017 was collected 100,000

38. The income tax due in 2017 is

a. P40,000
b. P45,000
c. P15,000
d. P25,000

39. In 2018, which of the following statements is correct?

a. There is a deficiency income tax of P24,000 for 2017
b. The taxable net income should be corrected to P130,000
c. There is a taxable recovery amounting to P80,000 in 2018
d. The bad debts expense in 2017 should be reduced to P20,000

40-41). Bobby, lessor, leased a lot to Christina, lessee, for 15 years beginning January 1, 2016, subject to the following terms of and conditions:
Monthly rental ₱ 20,000
Advance rental for 2 years 480,000
Security deposit 240,000
Annual RPT to be paid by lessee 10,000

Cost of building constructed by lessee ₱2,800,000

(to be owned by lessor upon termination of lease)
Building completed on July 1, 2018
Estimated life of building (in years) 20

40. Determine the taxable income of lessor Bobby for year 2016, 2017, 2018 and 2019.
(a)​ Under the Outright Method.
a. 490,000; 10,000 ; 3,050,000 ; 250,000
b. 490,000; 490,000; 3,050,000; 250,000
c. 490,000; 10,000; 10,000; 250,000
d. None of the above

(b) Under the Spread- Out Method.

a.490,000; 10,000 ; 292,000 ; 334,000
b. 490,000; 490,000; 0; 250,000
c. 400,000; 10,000; 10,000; 250,000
d. None of the above

41. In number 40, determine the deductible expense of Cristina, lessee, for 2016, 2017, 2018 and 2019.
a. 250,000; 250,000; 362,000; 474,000
b. 250,000; 350,000; 474,000; 474,000
c. 250,000; 250,000; 362,000; 362,000
d. None of the above
42. Daryllson, dedicated and honest employee of ABC Corp. for the past 20 years was advised that he is to be retrenched
as the company was losing heavily but that he would be given the separation pay provided by law. To avoid
implication of inefficiency. A was advised to file a letter of resignation instead of being retrenched. If A files a
letter of resignation and receives the separation pay, such amount is
a.​ Taxable in full
b.​ Partly taxable, partly exempt
c.​ Exempt from income tax
d.​ Subject to final tax

43. Using the preceding number, if Daryllson is retrenched and receives the separation pay, such amount is
a.​ Taxable in full
b.​ Partly taxable, partly exempt
c.​ Exempt from income tax
d.​ Subject to final tax

44. Oliver is engaged in the marketing of cars. When Oliver’s son got married to the daughter of a senator, he gave the newly-wedded couple a brand
new car worth P800,000 as a wedding gift. The value of the car is
a. taxable income to the newly-wedded couple
b. Deductible expense of A
c. Not taxable income to the newly-wedded couple
d. Taxable income to the couple and deductible expense of A

45. Statement 1: Income derived from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in
banks in the Philippines, including sale of investments, by foreign governments and financial institution wholly-owned, controlled, or enjoying
financing from foreign government, shall be exempt from income tax, and consequently from withholding tax.

Statement 2: Gains realized from the sale or exchange or retirement of bonds, debentures, or other
certificates of indebtedness with a maturity of at least 5 years, shall not be taxable to the investor-seller.

a.​ Statement 1 is true

b.​ Statement 2 is true
c.​ Both statements are false
d.​ Both statements are true

46. Mike Reyes has been an employee of Matatag Steelworks Inc for the last 25 years. His employer set up a BIR
approved private benefit plan primarily for retirement payments to its retiring employees. His employer also set up a trust fund for the exclusive
benefit of its employees and to which the employees can make contributions. So far, Mike has contributed a total of P40,000 to this trust fund. When
he retired at age 55, he received the following amounts from his employer:
(1) P125,000 representing his retirement benefits and which was paid out of the BIR approved benefit plan, and
(2) a dividend of P140,000 from the trust fund.

Which statement is correct?

a.​ Only Mike’s retirement benefits are tax-exempt.
b.​ Both the retirement benefits and the dividend from the trust fund are tax exempt
c.​ The excess of the dividend over his contribution to the trust fund shall be taxable, and includible in gross income in his income tax return
d.​ All of the above
e.​ None of the above

47. In its first year, a domestic corporation did not derive any income nor any gain as it had not yet started commercial operations in said year.
However, it was assessed a deficiency tax by the BIR. The BIR found that the corporation overstated its pre-operating expenses, some of which were
unsubstantiated. Should such disallowed expenses give rise to income tax?
a.​ Yes. The fact that pre-operating expenses were overstated should give rise to a penalty in the form of income tax thereon.
b.​ No. Income tax cannot be imposed in the absence of any gain or profit which is realized or received, actually or constructively.
c.​ No. Assuming that the disallowance of the pre-operating expenses was proper, no income tax may result therefrom because the taxpayer did
not benefit from the deduction of the disallowed expenses.
d.​ (B) and (C)

48. Mr. Allan Bautista is engaged in the business of buying and selling of used cars. In the taxable year, he sold a used car to his first cousin thereby
incurring a loss of ₱50,000. Allan’s acquisition cost of the car was ₱100,000. Can Allan deduct the loss in his ITR in computing his income tax
payable?

a)​ No. The loss is a personal, and not connected with his business.
b)​ No. The loss is connected with his business, but the loss is between related parties under Section 36 (B) of the Tax Code.
c)​ Yes. The loss is a capital loss which can be offset against capital gains that are includible in the ITR.
d)​ Yes. The loss is connected with his business, and is not between related parties.
49. ABC is a domestic corporation engaged in the merchandising business. For the calendar year 2021, it had a net income per books of
P500,000, after considering, among others, the following:

a)​ Dividend received from a domestic corporation P30,000

b)​ Provision for doubtful accounts 10,000
c)​ Dividend received from a foreign corporation 20,000
d)​ Portion of P150,000 advance rental already earned 100,000
e)​ Recovery of receivables previously written off:
i) Previously allowed by the BIR as deduction 10,000

ii) Previously disallowed by the BIR as deduction 30,000

f) Refund of deductible taxes
i)​ Previously allowed by the BIR as deduction 25,000
ii) Previously disallowed by the BIR as deduction 15,000
g) Bank interest income:
i) Philippine Bank 80,000
ii) USA Bank 100,000
(h) Amounts for lactation station expensed in current year 50,000

The taxable net income is

a.​ P435,000​ b. P485,000​ c. P375,000​ d. None of the above

50. Statement 1: Under Sec. 34(L) of the Tax Code, as amended by R.A. No. 10963 (TRAIN), a general professional partnership
and the partners comprising such partnership may avail of the OSD only once, either by the GPP or the partners comprising the
partnership.

Statement 2: The partners of a GPP may avail either the Itemized Deductions or the OSD against their distributive shares IF the
basis of such distributive share is the GPP’s gross income, and not its net income. This means that the GPP does not avail either of
the Itemized Deductions nor of the OSD in computing the basis of the distributive shares of the partners.

b.​ Both are true.

c.​ Only Statement 1 is true.
d.​ Only Statement 2 is true.
e.​ Both are false.
51. A domestic corporation (on calendar year basis), which started operations in 2010, has the following data in 2021:

Sales, net of sales discounts of ₱550,000 ₱ 25,000,000

Cost of Sales 13,000,000
Gross income 12,000,000

Salaries of employees (net of payroll deductions) 5,000,000

Fringe benefits given to:
Rank and file employees 520,000
Managerial employees 650,000
Representation and entertainment expenses (business connected) 145,000
Rent expenses 200,000
Depreciation expenses 400,000
Bad debt expenses (1/2 charged off during year) 50,000
Payroll deductions:
CWT on compensation 600,000
SSS premiums 40,000
Philhealth contributions 60,000
Pag-ibig contributions 12,000
Union dues 5,000
Lactation station expenses 100,000
Other Income:
Cash dividend received from:
1) Domestic corporations
a) 70% of its income came from Philippine sources 90,000
b) 30% of its income came from Philippine sources 90,000
2) Resident foreign corporations
a) 70% of its income came from Philippine sources 40,000
b) 30% of its income came from Philippine sources 40,000
3) Non-resident foreign corporation 20,000

Tax withheld by customers/clients during first 3 quarters (BIR Form 2307) 90,000
Tax withheld by customers/clients in 4th Quarter (BIR Form 2307) 30,000

Taxes paid in first 3 quarters:

1st Quarter (RCIT less credits) ₱210,000
2nd Quarter (MCIT less credits)) 330,000
3rd Quarter (RCIT less credits) 149,250
(a)​ What annual return should it file?
(A)​ BIR Form No. 1702-RT – for Corporations, Partnerships, and Other Non-Individual Taxpayers Subject
Only to Regular Income Tax Rate
(B)​ BIR Form No. 1702-EX – for Corporations, Partnerships and Other Non-Individual Taxpayers EXEMPT under the
Tax Code (Sec. 30 and those exempted in Sec. 27(C)) and Other Special Laws, with NO Other Taxable Income
(C)​ BIR Form No. 1702-MX – for Corporations, Partnerships, and Other Non-Individual Taxpayers with MIXED
Income Subject to Multiple Income Tax Rates or with Income Subject to Special/Preferential Rates
(D)​ None of the above.

(b)​ How much is the corporation’s total gross sales, and where will it be indicated in the annual ITR?
(A)​ ₱25,550,000; Part IV, Item 27
(B)​ ₱12,100,000; Part IV, Item 33
(C)​ ₱8,187,000; Part IV, Item 37
(D)​ ₱242,000; Part IV, Item 42

(c)​ How much is the corporation’s total gross taxable income, and where will it be indicated in the annual ITR?
(A)​ ₱25,550,000; Part IV, Item 27
(B)​ ₱12,100,000; Part IV, Item 33
(C)​ ₱8,187,000; Part IV, Item 37
(D)​ ₱242,000; Part IV, Item 42

(d)​ How much is the corporation’s total allowable deductions, and where will it be indicated in the annual ITR?
(A)​ ₱25,550,000; Part IV, Item 27
(B)​ ₱12,100,000; Part IV, Item 33
(C)​ ₱8,187,000; Part IV, Item 37
(D)​ ₱242,000; Part IV, Item 42

(e)​ How much is the corporation’s net taxable income, and where will it be indicated in the annual ITR?
(A)​ ₱3,913,000; Part IV, Item 39
(B)​ ₱1,173,900; Part IV, Items 41 and 43; Part II, Item 14
(C)​ ₱1,104,900; Part IV, Item 55; Part II, Item 15
(D)​ ₱69,000; Part IV, Item 56; Part II, Item 16

(f)​ How much is the corporation’s RCIT, and where will it be indicated in the annual ITR?
(A)​ ₱3,913,000; Part IV, Item 39
(B)​ ₱978,250; Part IV, Items 41 and 43; Part II, Item 14
(C)​ ₱1,104,900; Part IV, Item 55; Part II, Item 15
(D)​ ₱69,000; Part IV, Item 56; Part II, Item 16

(g)​ How much is the corporation’s MCIT, and where will it be indicated in the annual ITR?
(A)​ ₱25,550,000; Part IV, Item 27
(B)​ ₱12,100,000; Part IV, Item 33
(C)​ ₱8,187,000; Part IV, Item 37
(D)​ ₱121,000; Part IV, Item 42

(h)​ How much is the corporation’s total available credits, and where will it be indicated in the annual ITR?
(A)​ ₱3,913,000; Part IV, Item 39
(B)​ ₱1,173,900; Part IV, Items 41 and 43; Part II, Item 14
(C)​ ₱809,250; Part IV, Item 55; Part II, Item 15
(D)​ ₱69,000; Part IV, Item 56; Part II, Item 16

(i)​ How much is the corporation’s income tax payable, and where will it be indicated in the annual ITR?
(A)​ ₱3,913,000; Part IV, Item 39
(B)​ ₱1,173,900; Part IV, Items 41 and 43; Part II, Item 14
(C)​ ₱1,104,900; Part IV, Item 55; Part II, Item 15
(D)​ ₱169,000; Part IV, Item 56; Part II, Item 16
52. I. The point on which a tax is originally imposed is impact of taxation.
II. The point on which a tax burden finally rests or settles down is incidence of taxation.
III. Police power is superior to the non-impairment clause of the constitution.
IV. Power of taxation is not superior to the non-impairment clause of the constitution

a. All true
b. All false
c. Half true
d. None of the above

53. I. No person shall be imprisoned for debt or non-payment of tax.

II. Tax laws are civil and penal in nature because there are criminal penalties when they are
violated.
III. Taxes may be collected in an unlimited amount.
IV. License fees may be collected in an unlimited amount.

a. One statement is true

b. Two statements are true.
c. Three statements are true
d. All statements are true.

54. I. Tax is imposed on persons, property, and property rights.

II. Special assessment is imposed on persons, property and property rights.
III. Tax collection is a legislative act.
IV. Imposition of tax is an administrative act.

a. One statement is true.

b. Two statements are true.
c. Three statements are true.
d. All statements are true.

55. I. There can only be a tax if there is a law imposing the tax.
II. The power to tax includes the power to destroy.

a. True, true
b. True, false
c. False, true
d. False, false

56. I. Due process of law in taxation under the constitution is a grant of power.
II. Provisions in the Philippine constitution on taxation are grants of power.
III. There may be double taxation in the Philippines.
IV. Taxation may be used to implement the police power of the state.

a. One statement is true.

b. Two statements are true.
c. Three statements are true.
d. All statements are true.

57. I. License fee is a charge imposed under police power.

II. Special assessment is levied on land only.
III. Tax is imposed regardless of public improvements.
IV. Special assessment is imposed regardless of public improvements.

a. One statement is true.

b. Two statements are true.
c. Three statements are true.
d. All statements are true.

58. A system of taxation where the amount of revenue from indirect taxes is more than the direct
taxes is

a. Progressive
b. Regressive
c. Proportional
d. Schedular
59. Which theory in taxation states that without taxes, a government would be paralyzed for lack of
power to activate and operate it, resulting in its destruction?

a. Power to destroy theory c. Sumptuary theory

b. Lifeblood theory d. No money, no honey theory

60. An example of a tax where the concept of progressivity finds application is the
a. Graduated income tax rates on individuals
b. Excise tax on petroleum products
c. Value-added tax on certain articles
d. Amusement tax on boxing exhibitions

61. The power to tax is the power to destroy. Is this always so?
a. No. The Executive Branch may decide not to enforce a tax law which it believes to be confiscatory.
b. Yes. The tax collectors should enforce a tax law even if it results to the destruction of the property rights of the taxpayer.
c. Yes. The tax laws should always be enforced because without taxes the very existence of the State is endangered.
d. No. The Supreme Court may nullify a tax law, hence, property rights are not affected.

62. This is not an inherent limitation on the power of taxation:

a. Double taxation, though not prohibited, is disfavored.
b. Equality and uniformity in taxation
c. Public purpose of taxation
d. Territoriality

63. Revenue regulations (RRs) are:

a. Issuances signed by the Secretary of Finance, upon recommendation of the CIR, that
specify, prescribe or define rules and regulations for the effective enforcement of the
provisions of the National Internal Revenue Code (NIRC) and related statutes.
b. Issuances that publish pertinent and applicable portions, as well as amplifications, of laws,
rules, regulations and precedents issued by the BIR and other agencies/offices.
c. Issuances that provide directives or instructions; prescribe guidelines; and outline
processes, operations, activities, workflows, methods and procedures necessary in the
implementation of stated policies, goals, objectives, plans and programs of the Bureau in
all areas of operations, except auditing.
d. None of the above.

64. Revenue Memorandum Circulars (RMCs) are:

a. Issuances signed by the Secretary of Finance, upon recommendation of the Commissioner
of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National
Internal Revenue Code (NIRC) and related statutes.
b. Issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents
issued by the BIR and other agencies/offices.
c. Issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods
and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in all areas of
operations, except auditing.
d. None of the above.

65. Revenue Memorandum Orders (RMOs) are:

a. Issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescribe or
define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related
statutes.
b. Issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued by the
BIR and other agencies/offices.
c. Issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows,
methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in
all areas of operations, except auditing.
d. None of the above.

66. The following are the powers of the CIR except:

a. After a return has been filed or when no return is filed, the CIR may authorize the
examination of any taxpayer, and the assessment of the correct amount of tax.
b. The CIR has the power to issue Summons or Subpoena Duces Tecum to a taxpayer, an
officer or employee of a taxpayer, or to any person having possession of records relating
to the business of a taxpayer.
c. The CIR has the power to take the testimony of a person, under oath, that may be relevant
or material to the inquiry.
d. The CIR has the power to inquire into a taxpayer’s bank deposits in all instances.
67. Dante Company is a hotel company registered as a local economic enterprise (“LEE”) of the City of Dapitan. The company is asserting
that, as an LEE owned and operated by a local government unit (“LGU”), it should no longer be required to pay income taxes to the BIR. It
argues that all revenues collected by it must accrue exclusively to the city government of Dapitan. Is the company correct?
a) Yes. Since the company is owned by an LGU which itself is exempt from taxes imposed by
the Tax Code, the same privileges must also be accorded to it.
b) Yes. Under Section 18 of the Local Government Code, LGUs are authorized to generate their own sources of revenues, and the allocation
of the same shall accrue exclusively to them.
c) No. The company is not one of those corporations exempt from taxes under Section 30 of the Tax Code or under any special laws.
Besides, the acts of an LGU in its corporate capacity and for the purpose of economic gain may be subject to tax just like any other
private or government corporation.
d) None of the above.

68.Mr. Compton sells shoes in Makati through a retail store. He pays the VAT on his gross sales to the BIR, and the local business tax based
on the same gross sales to the City of Makati. He comes to you for advice because he thinks he is being subjected to double taxation which
he thinks is illegal.
a. There is double taxation and it is not allowed.
b. The City of Makati has no taxing power.
c. There is double taxation, and it is allowed.
d. All of the above.

69. D - convicted

70. The Municipality of Oslob in the Province of Cebu conducts Butanding Watching Activity operationsfor visiting tourists. It also
provides guides to assist the tourists. For such services, the municipalitycharges and collects fees from the tourists. Are these fees taxable?
(a) No. The municipality is a political subdivision of the National Government and thus exempt fromtaxes.
(b) Yes. The income derived by the municipality is not in the exercise of its essential governmentfunctions, but pursuant to its proprietary
function. The income derived therefrom is subject to bothincome tax and VAT. (BIR Ruling No. 471-2018, March 13, 2018).
(c) It depends whether the fees received shall be used for the benefit of the residents of the municipality.
(d) None of the above

The End!