Archive for September 2019

Larry and Lynn obtain a divorce in the current year. Under the terms of the divorce, Lynn receives possession of their home for five years and custody of their daughter, Laura. Larry had inherited the home and must pay all of the costs of its maintenance, taxes and insurance, as well as $12,000 in child support a year. Larry lives in an apartment. What tax issues should Larry and Lynn consider?

Larry and Lynn obtain a divorce in the current year. Under the terms of the divorce, Lynn receives possession of their home for five years and custody of their daughter, Laura. Larry had inherited the home and must pay all of the costs of its maintenance, taxes and insurance, as well as $12,000 in child support a year. Larry lives in an apartment. What tax issues should Larry and Lynn consider?



Answer: Is Larry's payment of the expenses related to the home considered alimony, and thereby deductible by him and income to Lynn? Is Larry providing a home for a dependent so that he could be able to file head of household? Have Larry and Lynn reached an agreement as to who receives the dependency exemption for Laura?

Mary Ann pays the costs for her Aunt Hazel to live in a nursing home. Aunt Hazel receives Social Security benefits of $7,000 a year which are turned over to the nursing home. Mary Ann pays the remaining cost of $33,000. Hazel has no other income. Mary Ann visits Hazel twice a week and meets with doctors and nurses regarding Hazel's medical care. What tax issues should Mary Ann consider?

Mary Ann pays the costs for her Aunt Hazel to live in a nursing home. Aunt Hazel receives Social Security benefits of $7,000 a year which are turned over to the nursing home. Mary Ann pays the remaining cost of $33,000. Hazel has no other income. Mary Ann visits Hazel twice a week and meets with doctors and nurses regarding Hazel's medical care. What tax issues should Mary Ann consider?



Answer: Can Mary Ann file as head of household? Would Mary Ann be able to claim Hazel as a dependent?

Foreign exchange student Yung lives with Harold and Betty while he studies in the US. He moved into their home January 5, 2011 and has resided with them for the remainder of the year. Yung does not pay anything for his room and board. Harold and Betty provide all of Yung's meals. Yung receives a scholarship to pay for his tuition, books and fees. He works on campus, earning $4,000 a year. What tax issues should Harold and Betty consider?

Foreign exchange student Yung lives with Harold and Betty while he studies in the US. He moved into their home January 5, 2011 and has resided with them for the remainder of the year. Yung does not pay anything for his room and board. Harold and Betty provide all of Yung's meals. Yung receives a scholarship to pay for his tuition, books and fees. He works on campus, earning $4,000 a year. What tax issues should Harold and Betty consider?



Answer: Can Harold and Betty claim Yung as a dependent? Does he meet the requirements for a qualified dependent? Do they provide more than half of Yung's support? Does Yung receive amounts from home that he uses for his support?

Alexis and Terry have been married five years and file joint tax returns. Alexis began embezzling funds from her employer during the third year of their marriage. Last year, Alexis suddenly left the country and Terry does not know where she is. In the current year, Terry learned that the IRS had assessed him $27,000 in unpaid taxes due to Alexis's embezzlement. What tax issue(s) are present in Terry's situation? What questions would you ask Terry to determine his appropriate response to the IRS?

Alexis and Terry have been married five years and file joint tax returns. Alexis began embezzling funds from her employer during the third year of their marriage. Last year, Alexis suddenly left the country and Terry does not know where she is. In the current year, Terry learned that the IRS had assessed him $27,000 in unpaid taxes due to Alexis's embezzlement. What tax issue(s) are present in Terry's situation? What questions would you ask Terry to determine his appropriate response to the IRS?



Answer: Is Terry eligible for innocent spouse relief? Did Terry benefit financially from Alexis's embezzlement? Did Terry have reason to know of the embezzlement?

Paul and Hannah, who are married and file a joint return, are in the process of adopting a child who is born in December 2011. The child, a son, comes to live with them a week after his birth on December 12. The adoption is not finalized until February of 2012. What tax issues are present in this situation?

Paul and Hannah, who are married and file a joint return, are in the process of adopting a child who is born in December 2011. The child, a son, comes to live with them a week after his birth on December 12. The adoption is not finalized until February of 2012. What tax issues are present in this situation?



Answer: Are Paul and Hannah able to claim the baby as a dependent on their 2011 tax return and claim a child tax credit?

Sam and Diane separated in June of this year although they continue to live in the same town. They have twin sons, Norm and Cliff, who remain in the family home with Diane. Sam's income this year was $45,000 while Diane worked only part-time and made $15,000. Sam also gambles heavily but told Diane that he had no winnings this year. What tax issues should they consider?

Sam and Diane separated in June of this year although they continue to live in the same town. They have twin sons, Norm and Cliff, who remain in the family home with Diane. Sam's income this year was $45,000 while Diane worked only part-time and made $15,000. Sam also gambles heavily but told Diane that he had no winnings this year. What tax issues should they consider?


Answer: Sam and Diane have several choices for filing status. Since they are still married on December 31, the last day of the tax year, they could file jointly. That will probably result in the lowest overall tax liability. However, they should consider joint and several liabilities, especially if Diane fears that Sam may be hiding income. If Diane is maintaining the home in which at least one dependent child lives, she may be able to file as head of household. Of course, they could file separately which would result in the highest overall tax liability.

Discuss why Congress passed the innocent spouse provision and give requirements to be met in order to qualify as an innocent spouse and be relieved of liability for tax on unreported income.

Discuss why Congress passed the innocent spouse provision and give requirements to be met in order to qualify as an innocent spouse and be relieved of liability for tax on unreported income.



Answer: The provision was passed because each spouse is liable for the entire tax on a joint return as well as penalties imposed. This would not be fair if one spouse concealed information regarding income or deductions from the other spouse.
An innocent spouse is relieved of liability when
1. The amount is attributable to grossly erroneous items of the other spouse.
2. The innocent spouse did not know of and had no reason to know that there was such an understatement of tax.
3. To hold the innocent spouse liable for the understatement would be inequitable.
4. The innocent spouse elects relief within two years after the IRS begins collection activities.

Discuss reasons why a married couple may choose not to file a joint return.

Discuss reasons why a married couple may choose not to file a joint return.



Answer: 1. One spouse incurs most of medical expenses and itemized deductions can be maximized.
2. They may not want joint tax liability.
3. Casualty losses may be deductible on a separate return but not on a joint return because of the 10% floor.

Raoul sells household items on an Internet website. He receives $3,340 cash and a lawn mower from this activity during the year. What tax issues should Raoul consider?

Raoul sells household items on an Internet website. He receives $3,340 cash and a lawn mower from this activity during the year. What tax issues should Raoul consider?



Answer: Raoul will have to report income from his Internet sale activities. The income should include $3,340 cash and the FMV of the lawn mower.

Billy, age 10, found an old baseball glove while exploring his new home. His father, Al, took the glove to a dealer in baseball memorabilia who verified that the glove belonged to Babe Ruth. Al sold the glove for $75,000. What tax issues should Al consider?

Billy, age 10, found an old baseball glove while exploring his new home. His father, Al, took the glove to a dealer in baseball memorabilia who verified that the glove belonged to Babe Ruth. Al sold the glove for $75,000. What tax issues should Al consider?



Answer: Al has $75,000 of income upon the sale of the glove. However, is there an argument that Billy is the owner of the glove since he found it, and he should be taxed on the proceeds? Does Billy giving the glove to Al constitute an assignment of income?

Aaron found a prototype of a new cell phone with Internet service and other computing capabilities while in a bar one evening. He offered the prototype to the owner of a magazine and blog that reviews hand-held digital devices. The owner paid Aaron $10,000 in return for the prototype. What tax issues should Aaron consider?

Aaron found a prototype of a new cell phone with Internet service and other computing capabilities while in a bar one evening. He offered the prototype to the owner of a magazine and blog that reviews hand-held digital devices. The owner paid Aaron $10,000 in return for the prototype. What tax issues should Aaron consider?



Answer: The $10,000 must be included in Aaron's gross income.

James and Colleen have reached an agreement with Kelsey in which she will give birth to a baby, and then give the baby to James and Colleen. In return, James and Colleen will pay Kelsey $40,000 cash and pay for her medical expenses. What tax issues should Kelsey consider?

James and Colleen have reached an agreement with Kelsey in which she will give birth to a baby, and then give the baby to James and Colleen. In return, James and Colleen will pay Kelsey $40,000 cash and pay for her medical expenses. What tax issues should Kelsey consider?



Answer: Is the receipt of cash and payment of medical expenses income to Kelsey?

Marcia and Dave are separated and negotiating a divorce agreement. They live in a common law state and have two children who will remain with Marcia. Dave is willing to transfer the jointly owned home to Marcia. He wishes to keep the couple's jointly owned boat. Dave will either transfer securities to Marcia ($100,000 adjusted basis, $150,000 fair market value) or will pay her $30,000 for 5 years with interest of 8%. What issues should Marcia and Dave consider when formulating their divorce agreement?

Marcia and Dave are separated and negotiating a divorce agreement. They live in a common law state and have two children who will remain with Marcia. Dave is willing to transfer the jointly owned home to Marcia. He wishes to keep the couple's jointly owned boat. Dave will either transfer securities to Marcia ($100,000 adjusted basis, $150,000 fair market value) or will pay her $30,000 for 5 years with interest of 8%. What issues should Marcia and Dave consider when formulating their divorce agreement?



Answer: Marcia and Dave should consider the tax treatment of the transfer of the home to Marcia and the boat to Dave. That is, what are the tax consequences of a property settlement? (No immediate tax consequences; a carryover basis). In considering whether to take the securities or the payments, Marcia needs to consider whether or not the $20,000 per year will be classified as alimony, which is taxable. (It would be deductible for AGI to Dave). Each should consider what determines whether or not a payment is alimonymust be made in cash, must not be specified to "not be alimony," must end with Marcia's death or remarriage, Marcia and Dave can not live together. While the transfer of securities would not trigger immediate tax consequences, if Marcia sold the securities, she would have capital gain which she could offset against any capital losses she might have for the year.

While certain income of a minor may now be taxed at the parent's tax rate, discuss how income shifting may still be accomplished and any constraints that may exist on income shifting.

While certain income of a minor may now be taxed at the parent's tax rate, discuss how income shifting may still be accomplished and any constraints that may exist on income shifting.



Answer:
1. Children may own stock in the family business. Dividends may be distributed to the children, but these may be taxed at the parents' rates.
2. A child may work in the family business. Income earned by the child would be taxed at the child's tax rate. Income earned by the child would be subject to reasonable compensation limits.
3. Series EE U.S. savings bonds may be purchased in the child's name to mature after the child reaches age 24. A gift of the bonds to the child may be subject to gift tax.

Adanya's marginal tax rate is 35% and she is trying to decide whether to invest in tax-exempt bonds which pay 5% interest or taxable bonds paying 7% interest. The bonds have equivalent risk. Which of the bonds would yield the highest amount of income after taxes?

Adanya's marginal tax rate is 35% and she is trying to decide whether to invest in tax-exempt bonds which pay 5% interest or taxable bonds paying 7% interest. The bonds have equivalent risk. Which of the bonds would yield the highest amount of income after taxes?


Answer: The taxable bonds yield 4.55% after-tax [.07 - (1-.35)], so she should invest in the tax-exempt bonds.

Violet and Ashley are sisters. Ashley is unable to bear children, and she asks Violet to be a surrogate mother for her. According to the agreement, Ashley will pay Violet $25,000 and reimburse her medical expenses. What tax issues should Violet consider?

Violet and Ashley are sisters. Ashley is unable to bear children, and she asks Violet to be a surrogate mother for her. According to the agreement, Ashley will pay Violet $25,000 and reimburse her medical expenses. What tax issues should Violet consider?



Answer: Will the $25,000 cash and payment of medical expenses be income or a gift to Violet?

Taylor begins a new job as a logistics manager. His company advises him that he may need to travel internationally on occasion, so he should obtain a passport. The company reimburses Taylor for the cost of the passport. Taylor uses the passport when he vacations in Europe later in the year. What tax issues should Taylor consider?

Taylor begins a new job as a logistics manager. His company advises him that he may need to travel internationally on occasion, so he should obtain a passport. The company reimburses Taylor for the cost of the passport. Taylor uses the passport when he vacations in Europe later in the year. What tax issues should Taylor consider?



Answer: Does Taylor have income from his company's payment of his passport cost? Would this expenditure be considered a working condition or de minimis fringe benefit?

Chloe receives a student loan from a foundation which encourages students to pursue teaching careers. Under the terms of the loan, Chloe will not have to repay the loan if she teaches in a public school for ten years. What tax issues should Chloe consider?

Chloe receives a student loan from a foundation which encourages students to pursue teaching careers. Under the terms of the loan, Chloe will not have to repay the loan if she teaches in a public school for ten years. What tax issues should Chloe consider?



Answer: Does Chloe have income from the loan forgiveness? In what year(s) will the income be recognized?

Benedict serves in the U.S. Congress. In the current year, a lobbyist paid for Benedict to take a one-week vacation to Bermuda. Benedict did not incur any expense for the trip. What tax issues should Benedict consider?

Benedict serves in the U.S. Congress. In the current year, a lobbyist paid for Benedict to take a one-week vacation to Bermuda. Benedict did not incur any expense for the trip. What tax issues should Benedict consider?



Answer: Does Benedict have income due to the receipt of the all-expense paid trip? Could the trip be considered a gift?

John, who is President and CEO of ZZZ Corporation which owns the ZZZ hotel chain, is working with his Human Resources department to design an employee fringe benefits package. He would like employees to receive discounts on goods and services provided by the corporation, would like to provide free hotel rooms to employees, would like to provide transit passes or pay for parking in metropolitan areas, and would like to provide recreational and athletic facilities. What issues should John consider in designing his package?

John, who is President and CEO of ZZZ Corporation which owns the ZZZ hotel chain, is working with his Human Resources department to design an employee fringe benefits package. He would like employees to receive discounts on goods and services provided by the corporation, would like to provide free hotel rooms to employees, would like to provide transit passes or pay for parking in metropolitan areas, and would like to provide recreational and athletic facilities. What issues should John consider in designing his package?



Answer: John should be aware that some employee fringe benefits (working condition fringes, for example) can discriminate in favor of highly compensated individuals without triggering taxable income. In addition, he should determine the requirements for non taxability of no-additional-cost fringes (free hotel rooms), the maximum discounts allowed on goods and services to ensure non taxability, as well as the rules for exclusions from income for nondiscriminatory parking and transit passes, etc.

Discuss briefly the options available for avoiding double taxation for the U.S. citizen earning income from sources outside the United States

Discuss briefly the options available for avoiding double taxation for the U.S. citizen earning income from sources outside the United States



Answer: A U.S. citizen earning income from sources outside the United States may utilize the foreign tax credit whereby income taxes paid to foreign countries are subtracted from the taxpayer's U.S. income tax liability. Alternatively, the U.S. taxpayer who qualifies may claim the foreign-earned income exclusion whereby up to $92,900 in 2011 of earnings from personal services rendered in a foreign country is excluded from gross income. To qualify for the foreign-earned income exclusion, the taxpayer must meet the physical presence test or the bona fide residence test.

Discuss the requirements for meals provided by employers to be excluded from their employees' income. How is the de minimis rule distinguished from these requirements?

Discuss the requirements for meals provided by employers to be excluded from their employees' income. How is the de minimis rule distinguished from these requirements?



Answer: Meals provided by an employer may be excluded from an employee's gross income if they are furnished on the employer's premises and for the convenience of the employer. In addition, Sec. 132 provides a de minimis exception. Some employers provide supper money to employees who must work overtime. If such benefits are occasionally provided to employees, the amount is excludable from the employee's gross income.

In 2006, Gita contributed property with a basis of $500,000 and a fair market value of $3,000,000 to a qualified small business corporation for all of its common stock. She sells one-half of the stock after five years for $4,000,000. What is the amount of taxable gain on the transaction?

In 2006, Gita contributed property with a basis of $500,000 and a fair market value of $3,000,000 to a qualified small business corporation for all of its common stock. She sells one-half of the stock after five years for $4,000,000. What is the amount of taxable gain on the transaction?



Answer: The amount of the realized gain is $4,000,000 - $250,000 = $3,750,000. Fifty percent of the gain ($1,750,000 ) is eligible for the exclusion for qualified small business stock. $1,750,000 is taxable.

On January 15, 2014, Vern purchased the rights to a mineral interest for $3,500,000. At that time it was estimated that the recoverable units would be 500,000. During the year, 40,000 units were mined and 25,000 units were sold for $800,000. Vern incurred expenses during 2014 of $500,000. The percentage depletion rate is 22%. Determine Vern's depletion deduction for 2014.

On January 15, 2014, Vern purchased the rights to a mineral interest for $3,500,000. At that time it was estimated that the recoverable units would be 500,000. During the year, 40,000 units were mined and 25,000 units were sold for $800,000. Vern incurred expenses during 2014 of $500,000. The percentage depletion rate is 22%. Determine Vern's depletion deduction for 2014.



a. $150,000
b. $175,000
c. $176,000
d. $200,000
e. $250,000


Answer: b

Orange Corporation begins business on April 2, 2014. The corporation has startup expenditures of $64,000 which it incurred last year. If Orange Corporation elects § 195, determine the total amount that Orange may deduct in 2014.

Orange Corporation begins business on April 2, 2014. The corporation has startup expenditures of $64,000 which it incurred last year. If Orange Corporation elects § 195, determine the total amount that Orange may deduct in 2014.



a. $0
b. $3,200
c. $4,267
d. $7,950
e. None of these


Answer: b

On June 1, 2014, Red Corporation purchased an existing business. With respect to the acquired assets of the business, Red allocated $300,000 of the purchase price to a patent. The patent will expire in 20 years. Determine the total amount that Red may amortize for 2014 for the patent.

On June 1, 2014, Red Corporation purchased an existing business. With respect to the acquired assets of the business, Red allocated $300,000 of the purchase price to a patent. The patent will expire in 20 years. Determine the total amount that Red may amortize for 2014 for the patent.



a. $0
b. $1,667
c. $11,667
d. $35,000
e. None of these


Answer: c

During the past two years, through extensive advertising and improved customer relations, Orange Corporation estimated that it had developed customer goodwill worth $500,000. For the current year, determine the amount of goodwill Orange Corporation may amortize.

During the past two years, through extensive advertising and improved customer relations, Orange Corporation estimated that it had developed customer goodwill worth $500,000. For the current year, determine the amount of goodwill Orange Corporation may amortize.



a. $16,667
b. $26,667
c. $33,333
d. $100,000
e. None of these


Answer: e

George purchases used seven year class property at a cost of $200,000 on April 20, 2014. Determine George's cost recovery deduction for 2014 for alternative minimum tax purposes, assuming George does not elect § 179.

George purchases used seven year class property at a cost of $200,000 on April 20, 2014. Determine George's cost recovery deduction for 2014 for alternative minimum tax purposes, assuming George does not elect § 179.



a. $2,500
b. $10,000
c. $14,280
d. $28,580
e. None of these


Answer: e

The following is an incorrect description of taxation

The following is an incorrect description of taxation



a. Legislative and inherent for the existence of the government
b. It involves the taking of property by the government
c. The amount imposed had no limit`


Answer: a. Legislative and inherent for the existence of the government

Which of the following is not correct?

Which of the following is not correct?



a. Collection from taxes are public money
b. Appropriation of taxes for the common good of the people is valid
c. Construction of private road from taxes are availed appropriation


Answer: c. Construction of private road from taxes are availed appropriation

Which of the following dividends are subject to income tax?

Which of the following dividends are subject to income tax?



a. Received by domestic corporation from another domestic corporation
b. Received by a resident corporation from a domestic corporation
c. Received by domestic from nonresident foreign corporation
d. Received by nonresident foreign corporation from another nonresident foreign corporation


Answer: c. Received by domestic from nonresident foreign corporation

Which of the following is a taxable compensation income?

Which of the following is a taxable compensation income?



a. Cost of living allowance
b. De minimis benefits
c. Retirement benefit under BIR approved retirement plan
d. Retrenchment Pay


Answer: a. Cost of living allowance

Which of the following is not taxable?

Which of the following is not taxable?



a. P2,50 for 10 days sick leave actually taken
b. P1,250 for 5 days unused vacation leave converted into cash
c. P1,000 for unused vacation leave received as part of separation pay due to voluntary resignation
d. P500 availed leave


Answer: b. P1,250 for 5 days unused vacation leave converted into cash

Which of the following is not taxable compensation income?

Which of the following is not taxable compensation income?



a. Free housing given to employee
b. Social Security System Benefits
c. Retirement pay under duly BIR approved benefit plan
d. Retrenchment pay


Answer: a. Free housing given to employee

Statement 1: All vacation leave and sick leave with pay are taxable compensation income Statement 2: All unused vacation leave converted into cash are taxable

Statement 1: All vacation leave and sick leave with pay are taxable compensation income
Statement 2: All unused vacation leave converted into cash are taxable



a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect


Answer: d. Both statements are incorrect

Which of the following is a taxable compensation income?

Which of the following is a taxable compensation income?



a. Professional fee, net of creditable withholding tax
b. Separation pay due to closure of the employer's business
c. Terminal pay inclusive of P15,000 13th month pay
d. Separation pay due to early retirement


Answer: d. Separation pay due to early retirement

Which of the following is a taxable compensation income?

Which of the following is a taxable compensation income?



a. Separation pay due to resignation
b. Retirement pay under BIR approved retirement plan
c. Separation pay due to disability
d. Terminal pay by fact of death


Answer: a. Separation pay due to resignation

Statement 1: Remuneration for casual labor not in the course of an employer's trade pr business is not considered as taxable compensation income Statement 2: Additional Benefits received by the employee for the convenience of the employer are not taxable income of the employee

Statement 1: Remuneration for casual labor not in the course of an employer's trade pr business is not considered as taxable compensation income
Statement 2: Additional Benefits received by the employee for the convenience of the employer are not taxable income of the employee



a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect


Answer: c. Both statements are correct

Which of the following is/are generally subject to final tax?

Which of the following is/are generally subject to final tax?



i. Compensation Income
ii. Business Income
iii. Passive Income
iv. Capital Gain


a. i, ii, ii and iv
b. i and ii only
c. iii and iv only
d. iii only


Answer: c. iii and iv only

If a property is received in lieu of cash compensation, the basis of tax is the

If a property is received in lieu of cash compensation, the basis of tax is the



a. Supposed amount of cash to be received
b. Agreed value of the property received
c. Fair market value of the property received
d. Salvage value of the property received


Answer: c. Fair market value of the property received

Which of the following is not a characteristics of income?

Which of the following is not a characteristics of income?



a. Increase in taxpayers wealth
b. Return of taxpayers wealth
c. Realization or receipt of gain
d. Earnings constructively received


Answer: b. Return of taxpayers wealth

Which of the following is classified as income?

Which of the following is classified as income?



a. Damage recovery due to physical injuries
b. Return of capital
c. Excess of selling price over cost of assets sold
d. Gifts received


Answer: c. Excess of selling price over cost of assets sold

Which of the following is not a criterion of a taxable income?

Which of the following is not a criterion of a taxable income?



a. There must be gain
b. The gain need not to be actually received
c. The gain must be included by the law as treaty from taxation
d. The law as treaty from taxation must exclude the gain


Answer: d. The law as treaty from taxation must exclude the gain

Statement 1: All wealth that flows into the taxpayer's hand other than, mere return of capital is income. Statement 2: All earnings are taxable with income tax

Statement 1: All wealth that flows into the taxpayer's hand other than, mere return of capital is income.
Statement 2: All earnings are taxable with income tax



a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect


Answer: a. Only statement 1 is correct

Total assets minus total liabilities is equal to

Total assets minus total liabilities is equal to



a. Net Worth
b. Owner's Capital
c. Shareholder's equity
d. All of the above


Answer: d. All of the above

Which of the following does not describe income?

Which of the following does not describe income?



a. Increase in taxpayer's wealth
b. Return of taxpayer's wealth
c. Realization or receipt of gain
d. Earnings constructively received


Answer: b. Return of taxpayer's wealth

Which of the following is not correct?

Which of the following is not correct?



a. If it is the first employment of the taxpayer, he must be registered with the BIR before employment or within 10 days from date of employment
b. If taxpayer is self-employed, he must register his business within 10 days from commencement of his business
c. If the taxpayer is both employed and doing business, he must have only one TIN as the employee and as a sole proprietor
d. TIN must be indicated in the return, documents or statement filed with the BIR


Answer: d. TIN must be indicated in the return, documents or statement filed with the BIR

Which of the following is correct?

Which of the following is correct? 



a. Fixing of tax rates
b. Valuation of Object of tax
c. Collection of Taxes
d. Assessment of Tax liability


Answer: d. Assessment of Tax liability

Which of the following statements is correct?

Which of the following statements is correct?



a. Levying and collection of taxes are legislative function
b. Assessment and Collection are administrative functions
c. Enacting of tax laws and its interpretation are legislative function
d. Levying and impositions are juridical functions


Answer: b. Assessment and Collection are administrative functions

Which of the following is not an activity involving tax administration?

Which of the following is not an activity involving tax administration?



a. Execution of judgement decided by the court in favor of the BIR
b. Passage of tax laws and ordinances through the legislature
c. Computation of tax due and payable
d. Taxpayer's compliance to pay tax obligation


Answer: b. Passage of tax laws and ordinances through the legislature

The BIR is under the supervision of the

The BIR is under the supervision of the



a. Department of Budget
b. Bureau of Customs
c. Department of Finance
d. Department of Trade and Industry


Answer: c. Department of Finance

The following instances allow the BIR Commissioner to inquire or examine the bank deposits of taxpayers, except

The following instances allow the BIR Commissioner to inquire or examine the bank deposits of taxpayers, except



a. To determine the gross estate of a decedent
b. When the taxpayer filed an application for compromise of his tax liability
c. The taxpayer waives his right in writing the confidentiality of the bank deposits
d. When the taxpayer fails the lifestyle check test and shows unexplained wealth


Answer: d. When the taxpayer fails the lifestyle check test and shows unexplained wealth

Which of the following is not within the scope of authority of the BIR Commissioner?

Which of the following is not within the scope of authority of the BIR Commissioner?



a. To exercise the levying function of Taxation
b. To interpret tax laws
c. To assess and collect BIR taxes
d. To decide cases involving National Internal Revenue Taxes


Answer: a. To exercise the levying function of Taxation

Which of the following could be an object of taxation?

Which of the following could be an object of taxation?



i. Person
ii. Tangible property
iii. Intangible property
iv. Rights


a. i and ii
b. i, ii and iii
c. i and iv
d. i ii , iii and iv


Answer: d. i ii , iii and iv

One of the following is not among the basic justification for taxation

One of the following is not among the basic justification for taxation



a. Taxation is based on necessity
b. Taxation is the lifeblood of the government
c. Taxation is the bread and butter of the government
d. Taxation is a voluntary contribution for the benefits received.


Answer: d. Taxation is a voluntary contribution for the benefits received.

All of the following statements are correct except one

All of the following statements are correct except one



a. Taxation power is an absolute power
b. Taxation power is the strongest of all inherent portion of the government
c. Tax laws must not violate Constitutional restrictions.
d. Exercise of Taxation power is subject to restrictions


Answer: a. Taxation power is an absolute power

Which of the following statements is not correct?

Which of the following statements is not correct?



a. Collections from taxes are public money
b. Appropriation of taxes for the common good of the people is valid
c. Construction of private road from the taxes is a valid appropriation
d. Allocation of taxes for the benefit of greater portion of population is considered for public purposes


Answer: c. Construction of private road from the taxes is a valid appropriation

Which of the following statement is not correct?

Which of the following statement is not correct?



a. Only the national government exercises the inherent power of taxation.
b. The power to tax by the local government units is a delegated power granted by the Constitution and other special laws
c. National legislation is exercised by the Congress
d. Interpretation of Tax Laws is done by the Legislative branch of the government


Answer: d. Interpretation of Tax Laws is done by the Legislative branch of the government

Which of the following is/are natural qualities of Taxation Power?

Which of the following is/are natural qualities of Taxation Power?



i. An inherent power
ii. Essentially an executive function
iii. An absolute Power
iv. Territorial in operation


a. i and iv only
b. ii and iii only
c. i and ii only
d. i only


Answer: a. i and iv only

Which of the following statements is/are correct?

Which of the following statements is/are correct?



i. Taxation is a process.
ii. Enactment of Tax Laws is part of the taxation process
iii. The Constitution expressly conferred to the power of Taxation to the President of the Philippines.
iv. Taxation requires voluntary contribution from inhabitant to support the government.


a. i, ii, iii, and iv
b. i, ii and iii only
c. i and ii only
d. i only


Answer: c. i and ii only

Which of the following statements is not correct?

Which of the following statements is not correct?



a. The government automatically possesses the power to collect taxes from its inhabitants
b. The government can enforce contribution upon its citizen only when the Constitution grants it.
c. Taxation power exists inseparably with the state.
d. The state has the supreme power to command and enforce contribution from people with its jurisdiction


Answer: b. The government can enforce contribution upon its citizen only when the Constitution grants it.

Which of the Following defines the country's tax Policy?

Which of the Following defines the country's tax Policy?



a. Philippine Constitution
b. National Internal Revenue Law
c. Pari Materia Principle
d. Tax Transformation


Answer: B. National Internal Revenue Law
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