Tax MCQ - Answer Key

UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW BAR OPERATIONS COMMISSION Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines Telefax No: 920.5514 loc. 315 | Mobile No: 0917.9823901

TAXATION (Answer Key) 1.

One of these is true: a. Waiver of prescriptive period to last until the completion of investigation is valid. b. Waiver is a taxpayer’s concession to the state, thus, it must be construed strictly against the state c. Waiver being unilateral, the state need not express its acceptance, and when accepted, the taxpayer need not be notified. d. Waiver being unilateral, acceptance by the state need not observe the level of authority of the officials empowered to accept.

2.

One of these has no time limit within which to assess: a. b. c. d.

3.

One of these is not a type of local tax and other impositions – a. b. c. d.

4.

Capital gains tax Documentary stamp tax Local transfer tax Income tax

Special classes of real property do not include – a. b. c. d.

6.

Municipal taxes on business & occupations Municipal fees & service charges Real property taxes Taxes on gross receipts of transportation businesses

For casual sale of real property, you do not pay – a. b. c. d.

5.

Income tax Transfer taxes (donor or estate) Value Added Tax Privilege tax

Local water district Public power – generating company Hospitals Schools

Which is not a levy on real property – a. b. c. d.

Special education fund Ad valorem tax on idle land Special assessment Transfer tax on sale or transfer

7. The manufacture of casino rubbing alcohol is subject to: a. VAT b. percentage tax

UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW BAR OPERATIONS COMMISSION Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines Telefax No: 920.5514 loc. 315 | Mobile No: 0917.9823901

c. specific tax d. advalorem tax 8. A tax imposed at every stage of distribution process on the sale, barter or exchange of goods and services and transactions deemed sale, as well as importation of goods and services. a. b. c. d.

privilege tax percentage tax VAT excise tax

9. Mario disputed a deficiency tax assessment and upon receipt of an adverse decision by the Commissioner of Internal Revenue, filed an appeal with the Court of Tax Appeals. While the appeal is pending, the BIR served a warrant of levy on the real properties of Mario to enforce the collection of the disputed tax. Granting arguendo that the BIR can legally levy on the properties, what could Mario do to stop the process? a. Appeal the BIR’s action to the Court of Appeals b. Dispute BIR’s levy on the properties before the Court of Tax Appeals c. File a motion for injunction with the Court of Tax Appeals on the ground that such collection will jeopardize the interest of the taxpayer or the government. d. Secure a temporary restraining order before the Supreme Court. 10. Additional exemption for each dependent child per RA 9504 a. b. c. d.

P 10,000 P 9,000 P 8,000 P 25,000

11. Income tax is not a a. b. c. d.

personal tax national tax excise tax direct tax

12. Under RA8424, the allowable deduction for medical expenses of a resident decedent shall not exceed : a. b. c. d.

P 50,000 P 550,000 P 5,000 P 500,000

13. Per RA 9504, how much is the total personal and additional exemption of Mrs. A, who became a widow during the taxable year and supporting her mother and one mentally retarded illegitimate 25 year-old child? a. P 75, 000 b. P 40, 000 c. P 100, 000

UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW BAR OPERATIONS COMMISSION Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines Telefax No: 920.5514 loc. 315 | Mobile No: 0917.9823901

d. P 48, 000 14. The following is not a taxable income of a resident Filipino citizen: a. b. c. d.

income from an illegal business income from a business abroad income from casino winnings from lotto

15. Which of the following are excluded from the gross estate? a. b. c. d.

proceeds of life insurance policy payable to an irrevocable beneficiary revocable transfers transfer in contemplation of death claims against insolvent persons

16. Basically, power of taxation is exercised by a. b. c. d.

the President the Congress Judiciary BIR

17. The standard deduction of P 1,000,000 from the gross estate is: a. b. c. d.

optional in addition to the itemized deductions not available to resident decedents in lieu of all itemized deductions

18. The following are the requisites for income to be taxable, except: a. b. c. d.

There must be gain or profit The gain must be received or realized The gain must not be excluded by law or treaty from taxation The income must exceed the personal and additional exemptions of the taxpayer

19. Who among the following are NOT required to file an income tax return? a. b. c. d.

Filipino citizen with business income from the Philippines. Resident alien on income derived within the Philippines. Non-resident alien engaged in trade or business An individual whose sole income has been subjected to final withholding tax.

20. Under RA 9337, a presumptive input tax credit is allowed to processors/manufacturers of milk, sardines, mackerel, refined sugar, cooking oil, and packed noodle-based instant meals at the rate of: a. 1.5%

UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW BAR OPERATIONS COMMISSION Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines Telefax No: 920.5514 loc. 315 | Mobile No: 0917.9823901

b. 4% c. 2% d. 8% 21. The following are qualified dependents of a head of the family, except: a. b. c. d.

Either or both parents Brother/Sister of whole or half-blood Senior citizen Grandchildren

22. Which of the following is deductible for income tax purposes: a. b. c. d.

Employer’s contribution to pension trust Personal, family, living expenses Wagering losses Kickbacks

23. For tax purposes, income is synonymous to: a. b. c. d.

Capital Receipts Realized profit Accumulated Profit

24. The following can avail of the Input Tax Credit, except: a. b. c. d.

Importer of goods/articles previously subjected to VAT Purchaser of domestic goods upon consummation of the sale Exporter of goods and services not registered under the VAT system Purchaser of services, lessee or licensee upon payment of compensation, rental, royalty or fee

25. Educational services rendered by private educational institutions are exempt from VAT if duly accredited by the following, except: a. b. c. d.

Securities and Exchange Commission Commission on Higher Education Department of Education, Culture and Sports Technical Education and Skills Development Authority

26. For VAT purposes in connection with deferred payment sale of real property, the term “initial payments” shall include: a. b. c. d.

Payments made in the year of sale in addition to the down payment Mortgage on the real property sold not exceeding the cost thereof Evidence of indebtedness issued by the purchaser to the seller at the time of sale Down payment only made at the time of sale.

27. In our jurisdiction, which of the following statements may be erroneous: a. Taxes are pecuniary in nature. b. Taxes are enforced charges and contributions.

UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW BAR OPERATIONS COMMISSION Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines Telefax No: 920.5514 loc. 315 | Mobile No: 0917.9823901

c. Taxes are imposed on persons and property within the territorial jurisdiction of a State. d. Taxes are levied by the executive branch of the government. 28. Citing Section 10, Article VIII of the 1987 Constitution which provides that salaries of judges shall be fixed by law and that during their continuance in office their salary shall not be decreased, a judge of a Regional Trial Court questioned the deduction of withholding taxes from his salary since it results into a net deduction of his pay. Is the contention of the judge correct? a. No. The contention is incorrect because taxes are enforced contributions. b. No. The contention is incorrect because taxes must be collected in order to support the government. c. No. The contention is not correct because deduction of withholding taxes is not a dimunition contemplated by the fundamental law. d. No. The contention is incorrect because deduction of withholding taxes is required by law. 29. What is the minimum compromise rate in cases of doubtful validity of assessment? a. b. c. d.

40% of the basic assessed tax 10% of the basic assessed tax No limitation P1,000,000

30. Which of the following VAT transactions are not considered zero-rated? a. b. c. d.

Export sales of goods Domestic sale of goods in the regular course of trade or business Foreign currency denominated sale Sale of gold to Bangko Sentral ng Pilipinas

31. Barbaran municipality has an ordinance which requires that all stores, restaurants, and other establishments selling liquor should pay a fixed annual fee of P20,000. Subsequently, the municipal board proposed an ordinance imposing a sales tax equivalent to 5% of the amount paid for the purchase or consumption of liquor in stores, restaurants, and other establishments. The municipal mayor refused to sign the ordinance on the ground that it would constitute double taxation. Is the refusal of the mayor justified? a. No. The refusal of the mayor is unjustified because double taxation is allowed in our jurisdiction. b. No. The refusal of the mayor is not justified because the impositions are of different nature and character. c. No. The refusal of the mayor is unjustified because it is not within his power. d. No. The refusal of the mayor is not justified because double taxation will generate more revenues.

UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW BAR OPERATIONS COMMISSION Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines Telefax No: 920.5514 loc. 315 | Mobile No: 0917.9823901

32. This is a summary administrative remedy, seizure of real property to enforce payment of tax due: a. b. c. d.

Levy Distraint Forfeiture Tax lien

33. Tino is engaged in buying and selling of fresh fruits at the Q-Mart and Aranque Markets. He is also exporting canned and preserved fruits to Japan. In 2004, he made a gross sales of P2,000,000. He is liable for VAT registration fee of : a. b. c. d.

P500 P1,000 P1,500 Exempt

34. Shirley was allowed to deduct P200,000 bad debts written off in 2003, where she had a net income before bad debts of P180,000 and a net loss of P20,000. IN 2004, she was able to recover the bad debts written off in full. The bad debts recovery is: a. b. c. d.

Taxable to the extent of P180,000 Taxable to the extent of P20,000 Taxable to the extent of P200,000 Not taxable

35. Separation pay is taxable. a. b. c. d.

if separation is due to death, sickness or injury of employee if employee voluntarily resigned if employee resigned at the age of 60 if the employer closed shop

36. The following are taxed like corporation a. b. c. d.

general professional partnership ordinary business partnership estates and trusts all of the above

37. VAT is a. b. c. d.

special tax local tax specific tax regressive tax

38. If monthly rental income of a residential unit exceeds P 10,000 per unit, the same shall be subject to 12% VAT. a. True, without any further condition.

UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW BAR OPERATIONS COMMISSION Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines Telefax No: 920.5514 loc. 315 | Mobile No: 0917.9823901

b. True, only if the total gross annual rentals received exceed P 1.5M c. False, this is subject to 0% VAT. d. False, this is exempt from VAT under RA 9337 39. The preliminary investigation of a fraudulent tax evasion case may be enjoined in the following cases. a. b. c. d.

when there is a prejudicial question when double jeopardy is clearly apparent when charges are manifestly false and motivated by lust for vengeance when the court has no jurisdiction over the offense

40. Sale of real estate is subject to VAT a. b. c. d.

True, if made in the regular course of trade or business False, it is exempt if the real estate is not classified as capital asset False, it is exempt if what is sold is a residential unit True, if what is sold is a residential unit

41. Why is the Fringe Benefits Tax collectible from the employer and not from the employee? a. b. c. d.

Valuation of benefits is easier at the level of the employer Collection of FBT is ensured because it is withheld at source The employee does not have the means to pay a and b are correct

42. A taxpayer with gross annual sales not exceeding P100, 000 is exempt from payment of business tax and registration requirements. a. True b. False, required to register with the BIR but exempt from the payment of registration fee c. False, required to pay registration fee d. b and c are correct 43. Which of the following statements is wrong? a. The MCIT is equal to 2% of the gross income of the corporation b. The MCIT is not computed quarterly but on an annual basis c. The MCIT payments can be carried over for the next 3 years immediately following such payment d. The taxpayer should pay the MCIT or the regular income tax whichever is higher. 44. The following are subject to 3% common carrier’s tax, except: a. b. c. d.

taxicab operators common carriers transporting cargoes tourist buses motor tricycles

45. .Assessment is necessary in the following cases, except:

UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW BAR OPERATIONS COMMISSION Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines Telefax No: 920.5514 loc. 315 | Mobile No: 0917.9823901

a. before the preliminary investigation of a fraudulent tax evasion case could prosper b. to fix the tax liability of a taxpayer c. establish a case for judicial action d. for issuance of warrant of distraint or levy 46. The manufacture and importation of the following for local consumption are subject to excise tax, except: a. b. c. d.

alcohol products tobacco products cinematographic films mineral products

47. The BIR commissioner may_________ payment of internal revenue tax when it appears to be unjustly or excessively assessed, or that the administrative and collection costs involved do not justify the collection thereof. a. b. c. d.

compromise abate credit refund

48. No credit/refund of taxes shall be allowed unless the taxpayer: a. Files a written claim for credit/refund payment b. Pays the tax under protest c. Appeals to the CTA d. Amends his tax return

with the BIR within 2 years from

49. The preliminary investigation of a fraudulent tax evasion case may be enjoined in the following cases. a. b. c. d.

when there is a prejudicial question when double jeopardy is clearly apparent when charges are manifestly false and motivated by lust for vengeance when the court has no jurisdiction over the offense

50. Which of the following statements is wrong? a. The MCIT is equal to 2% of the gross income of the corporation b. The MCIT is not computed quarterly but on an annual basis c. The MCIT payments can be carried over for the next 3 years immediately following such payment d. The taxpayer should pay the MCIT or the regular income tax whichever is higher.