1st Exam 2020 Multiple Choice Exam w Answers

AC2202
March 2020
I. TRUE OR FALSE
a. Both statements are true
b. Both statements are false
c. Only statement a is true
d. Only statement a is true
1. a. Taxation, as a power of the State, is granted by the Constitution. F

b. The exemption of churches from taxation is stated in the Phil. Constitution. T
2. a. Governments do not tax the income and properties of other governments. T

b. The income of the US embassy from Visa applications are subject to tax. T
3. a. Double taxation standing alone and not being forbidden by our fundamental law is
not a valid defense against the legality of a tax measure. T
b. A tax based on the sales collected by the BIR and the Local Government Unit is a
form of double taxation not allowed by Phil. laws. F
4. a. The rule is that a state may rightfully levy and collect the tax where the subject being
taxed has a situs under its jurisdiction. T
b. Income earned abroad by OFWs is not taxable because the situs of the income
is not within the jurisdiction of the Phil. Govt. F
5. a. Holme's doctrine provides that "Taxation is not the power to destroy while the court
sits." T
b. The application of Holme’s Doctrine in taxation includes imposition of higher taxes
on cigarettes. F
6. a. Taxation is the means by which government incurs expenses. F

b. A tax law is given retroactive application to pay unpaid expenses. F
7. a. Doctrine of imprescriptibility means that the error of an employee does not bind
the government. F
b. A tax prescribes if not collected within 5 years from the date of its assessment. T
8. a. Taxation laws refers only to those passed into law by the legislative branch of
government. F
b. Revenue Regulations are part of taxation laws of the Philippines. T
9. a. Under voluntary compliance system, the taxpayer himself determines his income,
reports the same through income tax returns and pay the tax to the government. T
b. The withholding taxes withheld by suppliers of goods or services are deducted to
the tax due under the "Self-assessment method". T
10. a. The Commissioner of the Internal Revenue decides tax cases, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals. F
b. Example of tax cases are the interpretation of different provisions of the NIRC. F
11. a. The Commissioner has the power to prescribe presumptive gross sales or receipt
for a taxpayer. T
b. The presumptive gross sales or receipt is derived from the conduct of inventory
taking or surveillance. F
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12. a. The Commissioner can inquire into bank deposits of taxpayers who claims financial
incapacity to pay tax in an application for tax compromise. T
b. In cases of financial incapacity, inquiry into bank deposits can proceed even
without waiver of the taxpayer's privilege under the Bank Deposit Secrecy Act. F
13. a. The Commissioner has the power to issue rulings of first impression. T
b. The Commissioner, however, cannot reverse, revoke or modify existing rulings of
the Bureau. F
14. a. Large taxpayers are under the Large Taxpayers Group (LTG) of the BIR National
Office. F
b. Publicly listed corporations are automatically classified as large taxpayers. T
15. a. Gross Income is broadly defined as any inflow of wealth to the taxpayer from
whatever source, legal or illegal, that increases net worth. T
b. Regular income of Barangay Micro-Business Enterprises are exempted by law from
taxation. T
16. a. In default of such documentary proof, the length of stay of the taxpayer is
considered in determining the classification of the taxpayer. T
b. Citizens staying abroad for a period of at least 180 days are considered non-
resident. F
17. a. A joint venture is a business undertaking for a particular purpose which may be
organized as a partnership or corporation. T
b. The Joint Venture of SM and Ayala in undertaking construction projects at the SRP
is an exempt joint venture. T
18. a. Dividend Income from non-resident foreign corporation depends on the pre-
dominance test. F
b. The pre-dominance test provides that the entire dividends is earned abroad if the
ratio of Phil. gross income over the world gross income in the three year period
preceding the year of dividend declaration is less than 50%. T
19. a. All items of gross income are taxable under the three income taxation schemes. F
b. The three income taxation schemes are: (1) Final Withholding Tax system, (2)
Capital Gains Taxation, and (3) Regular Income Taxation. T
20. a. Final Income taxation is characterized by final taxes wherein full taxes are withheld
by the income payor at source. T
b. All items of passive income is subject to final tax. F
21. a. The regular income tax scheme is the exception to the general rule in income
taxation such that this is the system used in computing income tax other than capital
gains on capital assets and final tax on passive income. F
b. In Regular income taxation, items of gross income are valued or measured using an
accounting method, accumulated over an accounting period, and reported to the
government through an income tax return. T
22. a. Short accounting period means there are less than 12 months for the taxable year.
T b. The death of a taxpayer may result to a short accounting period. T
23. a. Under installment method of accounting, gross income is recognized and reported
when earned regardless of when received. F
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b. Installment method is available to dealers of personal property on the sale of
properties they regularly sell. T
24. a. Dealers of real properties can avail of the installment method only if their initial
payment does not exceed 25% of the selling price. T
b. Selling price is always equal to the contract price under the installment method. F
25. a. Tax reporting is through the 3 types of returns to the government. T

b. Information returns do not involve payment or withholding of tax. T
26. a. Interest shall be imposed as penalty for late filing or payment of tax. T
b. The rate of interest is double the legal interest rate for loans or forbearance of any
money in the absence of any express stipulation. T
27. a. Final withholding system applies to passive income earned from within and
without the Philippines. F
b. Non-resident foreign corporations are not subject to the final withholding system.
F
28. a. The classification of assets as ordinary or capital depends upon the nature of the
property and not on the nature of the taxpayer's business and its usage. F
b. Real and other properties acquired by banks are considered as capital assets. F
29. a. Gains on dealings in other capital assets (other than domestic stocks and real
property) is subject to capital gains tax. F
b. Real properties of a property developer is subject to capital gains tax. F
30. a. Foreign corporations are required to recompute annualized capital gains tax. T
b. For foreign corporations, excess transactional payment is claimed as tax refund or
tax credit. T
II. Problems
1. A taxpayer sold domestic stocks with total par value of P1,200,000 for P1,500,000. The
stocks have a fair value of P1,650,000 and were acquired for P1,000,000. Compute
Documentary Stamp tax. P9,000
2. Mr. A sold for P5,000,000 a parcel of land. FMW is P6,000,000; Zonal Value is
P3,000,000. The buyer agreed to pay P200,000 installment every 5th of the month
starting on April 2019. Compute the Capital Gains tax payable in 2019. P360,000
3. In relation to problem no. 2, compute the Capital Gains tax payable in 2020. P0
4. Mr. B owns 20,000 shares of ABC Corp. at P5/share. On Feb. 29, 2020, ABC declared
dividends of P0.25 per share payable to stockholders of record on March 1, 2020. On
March 2, 2020, Mr. B sold 10,000 shares to Mr. C at P10 per share. Compute dividends tax
withheld on Mr. B's shares. P500
5. In relation to problem no. 4, compute capital gains tax. P7,500
6. Mr. D sold his 15,000 shares of stocks listed in the PSE for P32 per share. Compute the
Stock Transaction Tax? P2,880
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7. ABC Corporation (domestic) received dividends from XYZ Corporation (domestic). Total
amount received is P540,000. Compute the final tax on dividends that should be withheld.
P0
8. In relation to problem no. 7, if the dividend payee is a resident citizen, compute the
final tax on dividends that should be withheld. P60,000
9. Mr. X failed to pay on time his tax liability of P500,000. The tax was due on January 15,
2020. Compute the interest as penalty as of February 2020. P7,377
10. In relation to problem no. 9, supposed the BIR discovered the non-payment. Compute
the surcharge as penalty. P250,000
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1st Exam 2020 Multiple Choice Exam w Answers

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1st Exam 2020 Multiple Choice Exam w Answers

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AC2202

1. a. Taxation, as a power of the State, is granted by the Constitution. F

2. a. Governments do not tax the income and properties of other governments. T

6. a. Taxation is the means by which government incurs expenses. F

25. a. Tax reporting is through the 3 types of returns to the government. T

5. In relation to problem no. 4, compute capital gains tax. P7,500

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