Mock Departmentals - TAXQ

USJR – JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS ACADEMICS ARM – QUIZBOWLER’S SOCIETY TAXATION REVIEWER TAX ON INDIVIDUALS

TAX ON CORPORATIONS

Part I: Theories

1. Statement I: Nonresident citizens is A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year. Statement II: The term 'dealer in securities' means a merchant of stocks or securities, whether an individual, partnership or corporation, with an established place of business. a) b) c) d)

Statement I is true ; Statement II is false Statement I is false ; Statement II is true All of the statements are true All of the statements are false

2. Statement I: The term 'non-bank financial intermediary' means a financial intermediary, as defined in Section 2(D)(C) of Republic Act No. 337, [7] as amended, otherwise known as the "General Banking Act," not authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities. Statement II: The term 'bank' means some banking institution, as defined in Section 2 of Republic Act No. 337, [6] as amended, otherwise known as the "General banking Act." A bank may either be a commercial bank, a thrift bank, a development bank, a rural bank or specialized government bank. a) b) c) d)

Statement I is true ; Statement II is false Statement I is false ; Statement II is true All of the statements are true All of the statements are false

3. Statement I: Cash dividends are taxable by the graduated tax table Statement II: Stock dividends are taxable according to the final tax rates Statement III: That the tax on dividends shall apply only on income earned on or after January 1, 1998. a) b) c) d)

False, False, False True, False, False False, False, True True, True, True

4. Statement I: The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%)based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is lower. Statement II: The Commissioner shall have been duly notified by the taxpayer within sixty (60) days from the date of sale or disposition through a prescribed return of his intention to avail of the tax exemption for filing for exemptions for the CGT. a) b) c) d)

Statement I is true ; Statement II is false Statement I is false ; Statement II is true All of the statements are true All of the statements are false

5. Statement I: Multinational companies means a foreign firm or entity engaged in international trade with affiliates or subsidiaries or branch offices in the AsiaPacific Region and other foreign markets. Statement II: For a trading or merchandising concern, cost of goods sold shall include the invoice cost of the goods sold, plus import duties, freight in transporting the goods to the place where the goods are constructively sold, including insurance while the goods are in transit. a) b) c) d)

Statement I is true ; Statement II is false Statement I is false ; Statement II is true All of the statements are true All of the statements are false

6. 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. 7. Which of the following statements is not correct? A. Tax burdens shall neither be imposed nor presumed to be imposed beyond what the statute expressly and clearly states because tax statutes should be construed strictly against the government. B. Tax exemptions, tax amnesty tax condonations and their equivalent provisions are not presumed and, when granted are strictly construed against the taxpayer because such provisions are highly disfavored by the government. C. Exemptions from taxation are highly disfavored in law and he who claims tax exemption must be able to justify his claim or right. D. The House of Representatives has the duty and the exclusive power of constructing and interpreting tax laws. 8. The distinction of a tax from permit or license fee is that a tax is: A. Imposed for regulation. B. One which involves an exercise of police power. C. One in which there is generally no limit on the amount that maybe imposed. D. Limited to the cost of regulation. 9. Which of the following is not a scheme of shifting the incidence of taxation? A. The manufacturer transfers the tax to the consumer by adding the tax to the selling price of the goods sold; B. The purchaser asks for a discount or refuse to buy at regular prices unless it is reduced by the amount equal to the tax he will pay; C. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the title passes abroad instead of in the Philippines; D. The manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler, in turn to the retailer and finally to the consumer. 10.

Statement I. The power of taxation is inherent in sovereignty being essential to the existence of every government. Hence, even if not mentioned in the constitution the state can still exercise the power and is essentially a legislative function. Statement II. Even in the absence of any constitutional provision, taxation power falls to Congress as part of the general power of law-making. A. B.

11.

True; True True; false

False; true False; false

One is not correct A. If the taxpayer marries during the taxable year, he may claim the personal exemption in full as a married person for such year. B. If the taxpayer dies during the taxable year, his estate may still claim the personal and additional exemption for himself and his dependents as if he died at the close of such year. C. If the spouse of the taxpayer or any of the dependents dies during the taxable year, the taxpayer may still claim the same exemptions as if death occurred at the close of such year. D. If the taxpayer should have additional dependent children during the taxable year, he can always claim the additional exemptions for such year.

12. A. B. C. D. 13.

C. D.

30 60 30 60

A corporation files a days after the end of days after the end of days after the end of days after the end of

quarterly return within each of the 3 quarters each of the first 3 quarters each of the first 4 quarters each of the first quarters

The MCIT shall not apply to the following resident foreign corporations, except A. RFC engaged in business as int’l carrier subject to 2 ½ % of their Gross Phil billings B. RFC engaged in business as offensive Banking Units on their income from foreign currency transactions with local commercial banks. C. RFC engaged in business as regional operating headquarters D. RFC engaged in hotel, motel and resort operations

14.

Which of the following is not correct? The gross income tax A. Is optional to qualified corporation B. Is available if the ratio of costs of sales to gross sales or receipts from all sources does not exceed 55% C. Shall be irrevocable for three consecutive taxable years that the corporation is qualified under the scheme D. Is compared with the normal income tax and minimum corporate income tax

15.

If a partner on his own transactions, is on the cash method of accounting while the general professional partnership is on the accrual method of accounting, in the partner’s determination of his taxable income for the year, he A. Must convert his income from the partnership into cash method B. Must convert his own income into accrual method C. Does not report his income from the partnership because the partnership is exempt from income tax D. Can consolidate his share in the net income of the partnership under accrual method with his own income under cash method

Part II: Problems