QUIZ 1: PRINCIPLES OF TAX

1. The power to regulate liberty and property to promote the general welfare

a. Power of taxation

b. Power of eminent domain

c. Police power

d. Power of recall

2. The strongest of all inherent powers of the government is

a. Power of taxation

b. Power of eminent domain

c. Police power

d. Power of recall

3. Which of the following statements is not correct?

a. The goverment automatically possesses the power to collect taxes from its inhabitants

b. The goverment can enforce contribution upon its citizens only when the Constitution grants it.

c taxation power exist inseparably with the State

d. The State has the supreme power to command and enforce contribution from the people within its
jurisdiction.

4. Which of the following may not raise money from the government?

A. Police power

B. Eminent domain

C. Power of taxation

D. Power of recall
5. Which statements below expresses the lifeblood theory?

a. The assessed taxes must be enforced by the government

b. The underlying basis of taxation is government necessity, for without taxation, the government can't
either exist nor endure

c. Taxation is an arbitrary method of exaction by those who are in seal of power

d. The power of taxation is an inherent power of the sovereign to impose burdens upon subjects and
objects within its jurisdiction for the purpose of raising revenues.

6. Taxation is exercised both by the legislative and executive branch of the government. Which of the
following is not the function of the Congress?

a. Selecting the kind of tax

b. Fixing amount of tax

c. Prescribing rules of taxation

d. Assessment of tax liability

7. Which of the following statements is not correct?

a. Only the national government exercises the inherent power of taxation.

b. Local government units could exercise the power of taxation through legislated delegation.

c. National legislation is exercised by Congress.

d. Interpretation of Tax Laws is done by the Legislative branch of goverment.

8. One of the following is not a characteristic or an element of tax.

a. It is levied by the legislature

b. It is payable in money or in kind

c. It is proportionate in character

d. It is an enforced contribution
9. Under this basic principle of a sound taxation system, the government should not Incur a deficit .

A. Theoretical justice

b. Administrative feasibility

c Fiscal adequacy

d.. None of the above

10. The tax law must be capable of convenient, just and effective administration

a. Theoretical justice

b. Fiscal adequacy .

c. Administrative feasibility

d. Rule of apportionment

11. Tax which is demanded from one person in the expectation and intention that he shall indemnify
himself at the expense of another

a. Direct

b. Excise

c. Indirect

d. income

12. Which of the following statements is correct?

Statement I. Shifting will result in increase prices

Statement ll. Tax evasion is also known as tax dodging

a. l only

b. l and Il

c. Il only

d. Neither I or Ii
13. Is finding out means of improvement in production so as savings would compensate for taxes paid by
manufacturers or producers.

a. shifting

b. transformation

c. capitalization

d. tax dodging

14. . A citizen of the Philippines who works abroad and whose employment requires him to be physically

present abroad most of the time (≥ 183 days) during the taxable year is a

a. Resident citizen

b. Non-resident citizen

c. Resident alien

d. Non-resident alien

15. A citizen of the Philippines who works and derives income from abroad is a resident citizen if he
stayed outside the Philippines during the taxable year

a. For less than 180 days

b. For more than 180 days

c. For 183 days or more

d. For less than 183 days

16. A citizen of a foreign country is considered a non-resident alien engaged in business in the
Philippines if he stayed inside the Philippines during the taxable year

a. For 183 days or more

b. For less than 183 days

c. For more than 180 days

d. For less than 180 days

Identify if RC, NRC, RA, NRA-ETB, NRA-NETB, DC, RFC, NRFC OR NT

17. Manny, a filipino businessman went on a business trip abroad and stayed there most of the time of
the year.

ANS: RC

Note: only NRC if he went abroad for employment or as an immigrant)

18. Rihanna, an American singer , was engaged to sing for one week in MOA Arena Philippines. After
which she returned to USA.

ANS: NRA- NETB

Note: As to intention: Rihanna went in the Philippines for a definite purpose which in its nature may be
promptly accomplished (concert).

As to length of stay: less than 180 days

19. Due to his expertise, Engr. Paulo, a Filipino was hired by a foreign petroleum contractor in Thailand to
provide technical assistance from Feb- March, he was hired again for the months of June- July, and
October- December of the same taxable yr.

ANS: NRC

Note: at least 183 days

20. Kobe, a Mongolian national, arrived in the Philippines on January 1,2020, to visit his Filipina
girlfriend, he planned to stay in the country until December 31, 2023 by which time he will go back to his
legal wife in Mongolia. For 2022 taxable yr, Kobe shall be classified as:

ANS: RA

Note: More than 1 yr stay

21. Trust designed by the donor as irrevocable

ANS: RC

Note: Trust designated by donor as irrevocable is treated as an individual, if silent RC.

22 Estate of filipino citizen extra-judicially administered in the Philippines

ANS: NOT A TAXPAYER (NT)

Note: Extra- judicially administered Estate is not treated as a taxpayer.

23. Joint venture organized under foreign law and is not operating in the Philippines.

ANS: NRFC

Note: Joint venture is generally treated as a corporate taxpayer. The joint venture is organized under
foreign laws and not operating its business in the PH thus it is classified as NRFC.
24. Taxable joint venture organized in the Philippines

ANS: DC

Note: The joint venture is organized in the Philippines thus considered a Domestic corporation.

25. General professional partnership

ANS: NOT A TAXPAYER

QUIZ #2 – Chapter 3

a. Maria bought a car for ₱3,000,000 and sold the car to her friend Mario in the Philippines for
₱5,000,000. The fair market value (FMV) of the car is ₱9,000,000.

b. Maria has a crop plantation in Surigao, Philippines. She was expecting to harvest the crop next week
for a future profit of ₱300,000. Unfortunately, due to unforeseen circumstances, the crop died because
of extreme heavy rains. Maria had crop insurance in the Philippines to mitigate the risk. The crop
insurance gave Maria ₱300,000.

c. Maria, a minimum wage earner, received compensation worth ₱230,000 for the year.

d. Maria, who is also doing sidelines as an interior designer, offered her services to a client named Izza.
She physically went to Izza’s house in the Philippines to renovate the house. Since Izza had no cash to
pay, she asked Maria if it was okay to give her a bag as compensation. Maria agreed. The bag has a fair
market value of ₱15,000 PHP.

e. Maria loaned ₱50,000 pesos to buy the latest iPhone 15 Pro Max.

f. Maria, a drug dealer, received ₱50,000 pesos in her ATM from her client who bought drugs from her.
They transacted their sale in Binondo, Manila.

g. Maria received ₱50,000 in dividend income from a resident foreign corporation in 2023. The total
income of the resident foreign corporation for the years 2020, 2021, and 2022 is ₱10,000,000, from
which ₱6,000,000 are income earned in the Philippines.

h. Maria sold her domestic securities with a cost of ₱5,000 to a foreigner who lives in America for
₱20,000.

i. Maria, a real estate dealer, struck a deal with a client and sold a house and lot in America for
₱5,000,000 with a cost of ₱2,000,000.

j. Maria received ₱10,000 in interest income from a non-resident Japanese friend.

2. Calculate the gross income sourced outside the Philippines

3. Calculate the gross income of Maria if she is a resident citizen

4. Calculate the gross income of Maria if she is a non resident citizen

SOLUTION:

Step 1: IDENTIFY IF IT’S CONSIDERED GROSS INCOME SUBJECT TO INCOME TAX

Step 2: IDENTIFY IF THE INCOME IS SOURCED WITHIN OR WITHOUT THE PH.

Step 3: IDENTIFY IF THE TAXPAYER’S INCOME IS TAXABLE WITHIN AND WITHOUT THE PH.

TRANSACTIONS:

a. FMV = 9,000,000

SP = 5,000,000

COST= 3,000,000

SP-COST = 2,000,000 WITHIN (SITUS – PH- SITUS OF PERSONAL PROPERTY IS WHERE IT IS SOLD )

b. 300,000 WITHIN- recovery of loss profits

Note: At least 50% ang PH gross income ratio, so an basehan kung pila ang dividend income
earned in the PH is the % of INCOME earned in the Philippines ni RFC over the total income ni
RFC over a three year period prior to dividend declaration.

DIVIDEND INCOME= 50,000

SOURCED WITHIN (50,000 x 60%) = 30,000 WITHIN

h. 20,000- 5,000 cost = 15,000 gain WITHIN (situs of gain on sale of domestic securities are
presumed within the PH)
i. 5,000,000- 2,000,000 = 3,000,000 gain WITHOUT THE PH ( since situs of sale of real property is
where it is located)
j. 10,000 earned WITHOUT THE PH since the residence of the debtor is outside the Philippines.

1. Calculate the gross income sourced within the Philippines

a.2,000,000+ b.300,000+ d.15,000+ f.50,000+ g.30,000+ h.15,000

= 2,410,000

2. Calculate the gross income sourced outside the philippines

g.20,000 + i. 3,000,000 + j. 10,000

=3,030,000

3. calculate the gross income of Maria if she is a resident citizen

Income from within and without the PH itatax is RC so:

2,410,000 + 3,030,000

=5,440,000

4. Calculate the gross income of Maria if she is a non-resident citizen?

Income from within the PH ra itatax si NRC so:

=2,410,000