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INCOME TAXATION
Basic Principles of Taxation
1. One of the following is not a Constitutional limitation on the power of taxation?
A. Exemption from taxes of revenues and assets of educational institutions, including grants,
endowments, donations and contributions.
B. Non-impairment of the jurisdiction of Supreme Court in tax case
C. Exemption of the government from taxes.
D. Non-infringement of religious freedom and worship.
2. One of the following is not within the scope of legislative taxing power?
A. The person, property or occupation to be taxed.
B. The amount or rate of tax.
C. The enforcement and administration of tax.
D. The purpose of the tax provided it is public.
3. Which phase of taxation falls within the exclusive jurisdiction of the legislature:
A. Imposition
C. Enforcement
B. Administration
D. Collection
4. Kind of tax where rates increase as the tax base increase:
A. Proportional tax
C. Progressive tax
B. Regressive tax
D. Retroactive tax
5
1st Statement: In cases of deductions and exemptions from taxes. Doubts as to its
interpretation shall be resolved strictly against the taxpayer.
2nd Statement: Generally tax laws shall be interpreted liberally in favor of the government
A.
B.
C.
D.
st
1 Statement
True
True
False
False
2nd Statement
True
False
True
False
6. The following taxes are imposed by Congress in the, 1997 National Internal Revenue Code,
except:
A. Real Estate Tax
C. Donor's Tax
B. Value Added Tax
D. Income Tax
Page 1 of 5
TAXATION
B. P640,000
15. For purposes of computing minimum corporate income tax of a corporation engaged in the
sale of services, cost of services means:
A. Salaries and employees' benefits of personnel directly rendering the service.
B. Cost of facilities directly utilized in providing the services
C. Cost of supplies
D. All of the above
16. A corporation exempt from income tax is
A. Labor, agricultural or horticultural organization organized for profit.
B. Cemetery Company owned and operated exclusively for the benefit of its members.
C. Non-profit and stock educational institution.
D. Private education institution.
17. 1st Statement: Regional operating headquarters of a multinational company shall be taxed like
an ordinary foreign corporation.
2nd Statement: Regional or area headquarters of a multinational, company shall pay a tax ten percent of their taxable income.
A.
B.
C.
D.
1st Statement
True
True
False
False
2nd Statement
True
False
True
False
18. 1st Statement: A domestic corporation is taxable on all income derived from sources within and
outside the Philippines.
2nd Statement: A foreign corporation whether engaged or not in trade or business in the
Philippines, is taxable only on income derived from sources within the Philippines.
A.
B.
C.
D.
st
1 Statement
True
True
False
False
2nd Statement
True
False
True
False
19. Air Jordan is a resident international carrier. For the year 2003, its Gross Philippine Billings
totaled P2,000,000. The company's income tax liability would amount to:
A. P50,000
C. P200,000
September 18, 2004
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TAXATION
20. A non-resident corporation received dividend from a domestic corporation. The income tax
liability will be:
A. Gross income tax of 32%.
B. None, because it is an exempt income.
C. 15% final tax on the dividend income received.
D. 20% final tax on the dividend income received.
21. 1st Statement: All international carriers shall be subjected to a 2% tax on their gross
Philippines billings.
2nd Statement: Gross Philippine Billings in international shipping shall mean gross revenue
whether for passenger, cargo or mail originating from the Philippines up to final destination,
regardless of the place of sale or payments of the passage or freight documents.
A.
B.
C.
D.
st
1 Statement
True
True
False
False
2nd Statement
True
False
True
False
Questions 22 thru 24 are based on the following information.
Ina Computer University is a private educational institution. It owns a 10-storey building where the
first 5 floors are being used for its operations and the other 5 floors are being rented by other
entities. During the year 2003, its income and expenses figures are as follows:
Gross income
Tuition fees
P3,000,000
Rent Income
500,000
Operating Expenses
1,500,000
22. The income tax due of Ina Computer University shall be:
A. P640,000
C. P70,000
B. P200,000
D. P112,000
29. The cost basis of the new principal residence would be.
A. P10,000,000
C. P2,500,000
B. P7,500,000
D. P600,000
C. P200,000
D. P1,120,000
C. P245,000
D. P100,000
24. Assuming rent income of P5s000,000 the income tax due of Ina Computer University will be:
A. P640,000
C. P2,080,000
B. P200,000
D. P112,000
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TAXATION
Capital gain tax on sale of shares of stock of domestic corporation not listed and traded thru a local
stock exchange
30. Miss Tina Ranta is a shareholder of 1,000 shares of stock of a domestic corporation. The
shares were acquired at cost of P100 per share. For the period, she sold 500 shares in the
local stock market for P150 per share.
The Capital Gains Tax on the sale is;
A. P2,500
C. P3,750
B. P1,250
D. P 0
Gross Income
31. The following are excluded from gross income, except:
A. Amount received by insured as return of premiums
B. Amount received by insured as return on premiums
C. Proceeds of life insurance
D. Amount of damages received for injuries
Deductions from Gross Income
32. In general, ordinary and necessary trade, business or professional expenses have the
following requisites, except:
A. Substantiated by receipts
B. Must be ordinary and necessary expenses
C. Incurred during the taxable year
D. Directly attributable to the development, management, operation of the business.
33. In computing allowable deduction for purposes of income taxation:
1st Statement: Interest expense in connection with taxpayer's business shall be reduced by an
amount equal to thirty-eight percent (38%), beginning the year 2000 & thereafter, of interest
income subjected to final tax.
2nd statement: Interest incurred to acquire property used in trade shall only be allowed to be
treated as a capital expenditure.
A.
B.
C.
D.
1st Statement
True
True
False
False
2nd Statement
True
False
True
False
TAXATION
2nd Statement
False
True
False
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
C
D
D
D
D
B
D
A
A
C
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
B
B
B
C
B
B
B
B
B
D
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
B
A
B
C
D
D
D
A
A
D
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