Income Taxation -Midterm Examination
Please Answer the following items below: ( 70 pts.)
Part 1- Multiple Choice (2 pts. Each)
1. Which of the following inappropriately describes the nature oftaxation?
a. Inherent in sovereignty
b. Essentially a legislative function
c. Subject to inherent and constitutional limitation
d. Generally for public purpose
2. Which is not an object of taxation?
a. Persons b. Business c. Transactions d. Public properties
3. The power to enforce proportional contribution from the people for the support of
the government is
a. Taxation b. Police power c. Eminent domain d. Exploitation
4. This theory underscores that taxes are indispensable to the existence of thestate.
a. Doctrine of equitable recoupment c. The benefit received theory
b. The Lifeblood Doctrine d. The Holmes Doctrine
5. What is the theory of taxation?
a. Reciprocal duties of support and protection
b. Necessity
c. Constitutionality
d. Public purpose
6. Which limitation of taxation is the concept of “situs of taxation”based?
a. Territoriality c. International comity
b. Public purpose d. Exemption of the government
7. What is the primary purpose of taxation?
a. To enforce contribution from its subjects for publicpurpose
b. To raise revenue
c. To achieve economic and social stability
d. To regulate the conduct of business or profession
8. The following are inherent limitations to the power of taxation except one. Choose
the exception.
a. Territoriality of taxes c. For public purpose
b. Legislative in character d. Non-appropriation for religious purpose
9. Which is not a characteristic of tax?
a. It is an enforced contribution
b. It is generally payable in money
c. It is subject to assignment
d. It is levied by the law-making body of the State havingjurisdiction
10. Which of the following is a local tax?
a. Valued added tax c. Documentary stamp tax
b. Real property tax d. Other percentage taxes
11. Debt as compared to tax
a. It is a demand of ownership
b. It is not assignable
c. It will not cause imprisonment when not paid
d. It is generally payable in money
12. Which principle demands that tax should be just, reasonable, and fair?
a. Theoretical justice c. Administrative feasibility
b. Fiscal adequacy d. Economic consistency
13. The BIR under the supervision of
a. The Bureau of Customs c. The Department of Finance
b. The President d. Congress
14. A Filipino who has been abroad for more than 183 days is classified asa
a. Resident alien
b. Non-resident alien
c. Non-resident citizen
d. Non-resident citizen not engaged in trade or business
15. An alien who stayed less than one year in the Philippines is classified asa
non-resident alien not engaged in trade or business if he stayed herein for lessthan
a. 180 days b. 1 year c. 183 days d. 2 years
16. A corporation incorporated according to Philippines laws is a
a. Domestic corporation c. Non-resident corporation
b. Resident corporation d. De jure corporation
17. Which is taxable on world income?
a. Resident corporation c. Resident citizen
b. Non-resident citizen d. Resident alien
18. Carlos paid P20,000 annual premium for a P1,000,000 life insurance policy. After 7
years, Carlos surrendered the policy and was paid by the insurance company P200,00
which represents the cash surrender value of the policy.
Compute the return on capital
a. P1,000,000 b. P860,00 c. P60,000 d. P0
19. An alien received P200,000 compensation income in the Philippines and P300,000
rental income from abroad. How much will be subject to Philippine incometax?
a. None b. P200,000 c. P300,000 d. P500,000
Problem 20-22
Sarah has the following items of income:
Philippines Abroad
Business income P500,000 P100,000
Professional fees 100,000 50,000
Compensation income 400,000
Rent income 200,000 100,000
Interest income 20,000 30,000
20. Assuming Sarah is a resident citizen, compute the total income tax due.
a. P360,000 b. P250,000 c. P130,000 d. P340,000
21. Assuming Sarah is a Domestic corp an SME, compute the total income tax due
under Philippine income tax.
a. P375,000 b. P250,000 c. P244,000 d. P300,000
22. Assuming Sarah is a resident foreign corporation, compute the total income subject
to Philippine income tax.
a. P230,000 b. P305,000 c. P375,000 d. P390,000
23. Mr. Jones wishes to file his 2019 income tax return. To avoid penalty, he must file
his return on or before
a. April 15, 2019 c. August 15, 2020
b. April 15, 2020 d. November 15, 2020
24. Clyde received the following items during the year:
P200,000 donation from a girlfriend
P100,000 service fee from professional services
P300,000 inheritance from his deceased father
P100,000 income from illegal gambling
P50,000 gain on sale of his personal car
P250,000 profits from his bar restaurant
Compute the total income subject to income tax.
a. P1,050,000 b. P750,000 c. PP550,000 d. P500,000
25. Panay, Inc., a large domestic corporation, had the following income in
2021:
Philippines Abroad
Rent income P10,000,000 P12,000,000 Business expenses 8,700,000
9,800,000
The income tax due in the immediately preceding problem is::
a. P700,000 b. P875,000 c. P550,000 d. P325,000
Test II ( 2 pts. Each) Classify the individual taxpayer by indicating the
appropriate letter in the space provided:
a. Resident citizen e. Domestic corp.
b. Non-resident citizen f. Resident foreign Corp.
c. Resident alien
d. Non-resident alien in business in the Philippines
1. Melanie G., a Filipino overseas contract worker, on vacation in the Philippines
for one month. B
2. Winona R., non-resident citizen, after two years of working as entertainer under
contract in Japan, returns during the years to reside in thePhilippines. B
3. Cindy C., a Filipino singer, visited Canada for three days to sing for her cousin’s
wedding. A
4. Angelina J., a non-resident alien, finding the beauty of the Philippines, stayed
therein for more than one hundred eighty days. C
5. A Nonprofit corporation organized in the Phils. E
6. Anthony T., a British, left Manila for Europe for vacation. He has a re-entry
permit. C
7. Jenette B., a citizen, stayed in Japan for more than one hundred eightydays. A
8. Hilary S., an alien, stayed in the Philippines for more than oneyear. C
9. A Foreign Corporation doing business in the Phils. F
10. A 2nd. Yr. KoreanCollege student studying in the Phils. C
Income Tax Table for Individual Taxpayer
Taxable income per year Income Tax Rate
P250,000 and below 0%
Above P250,000 to P400,000 20% of the excess over P250,000
Above P400,000 to P800,000 P30,000 + 25% of the excess over P400,000
Above P800,000 to P2,000,000 P130,000 + 30% of the excess over P800,000
Above P2,000,000 to P8,000,000 P490,000 +32% of the excess over P2,000,000
Above P8,000,000 P2,410,000 +35% of the excess over P8,000,000
