Midterm Exam

Fitero B.
Garlitos
2017-E905019
Problem 1-1 True or False
Write true if the statement is correct or false if the statement is incorrect.
1. Eminent domain and police power can effectively be performed be without taxation. FALSE
2. Taxes may be imposed to encourage economic growth by granting tax exemption. TRUE
3. Taxation is a way of apportioning the cost of government among those who are privileged
to enjoy its benefits. TRUE
4. The state can enforce contribution upon its citizens in the form of taxes even without a
provision in the constitution authorizing it. TRUE
5. The police power of the government maybe exercises through taxation. TRUE
6. When the power to tax is delegated to the local government, only the legislative branch of
the local government can exercise the power. TRUE
7. The power of taxation can be exercise without limitation because its scope is unlimited.
FALSE
8. The power of taxation is absolute because it is the strongest of all powers of the
government. FALSE
9. Taxation presupposes an equivalent compensation. TRUE
10. There is no imposition of amount of police power. FALSE
1. Tax administration is the enforcement of tax policy TRUE

2. The BIR is the principal government administrative agency over tax administration FALSE
3. The BIR commissioner has the final power to interpret the provisions of the tax code FALSE
4. The secretary of justice has the authority to interpret and ascertain the validity of tax laws,
subject to the review by the courts of tax appeals. FALSE
5. Cooperatives are exempted from income tax, but not from payment of annual registration
fee. FALSE
6. No authority to print is needed if the receipts or invoices are serially numbered. FALSE
7. A person who continued the business upon his assumption of the said business. FALSE
8. Internal revenue taxes are self-assessing; hence tax assessment is not necessary to demand
settlement of a tax payer's tax liability. FALSE
9. When a taxpayer earned income, he has the responsibility to compute, file and pay his tax
liability to the BIR TRUE
10. The BIR has the burden to prove that the taxpayer concerned has received the tax
assessment. TRUE
Fitero B. Garlitos
2017-E905019
Problem 3-1 TRUE OR FALSE
Write True if the statement is correct or False if the statement is incorrect.
1. All increases in taxpayer’s net worth are taxable income. TRUE

2. An accrued interest income credited to the taxpayer is considered constructively received
FALSE
3. The theory of income constructively received is designed to prevent cash basis taxpayer to
delay reporting income TRUE
4. Income earned by a Filipino citizen from all source s is taxable in the Philippines FALSE
5. If compensation is received in the form of notes or other evidences of indebtedness, the
basis tax is the face value of the instrument. TRUE
6. Premium paid by the employer on life insurance coverage of employee wherein the
beneficiary is the employer, the basis of tax is the premium paid. TRUE
7. Under the accrual basis of reporting income, income is reported in the year of collection.
TRUE
8. Most taxpayers elect to report income in a fiscal year basis. FALSE
9. In general, trading and manufacturing business use accrual method while servicing
business use cash method of reporting income. FALSE
10. Corporations whose business consists of the sale inventories cannot use cash method. TRUE
1. Only the salary received by a statutory MWE is non-taxable but his income from business
is taxable. TRUE
2. Any amount received by the employee for any cause beyond the control of the employee
is tax exempt. TRUE
3. Baptismal tees given to religious officers are not subject to income tax because of the
separation of church and state. FALSE
4. Under the employee stock option, the difference between the fair market value and the
option price is compensation. TRUE
5. The cancellation of a taxpayer’s indebtedness is an income unless such cancellation of
indebtedness is a gift. TRUE
6. If debt is cancelled due to services rendered, the basis of tax is the value of service rendered.
FALSE
7. The excess of actual expenses over advances made shall constitute taxable income if such
amount is not returned to the employer. FALSE
8. Remuneration for casual labor not in the course of an employer’s trade or business is not
considered compensation. TRUE
Fitero B. Garlitos
2017-E905019
9. In the sale of service, gross income means gross receipts less sales returns, allowances,
discounts, and cost of services. TRUE
10. Cost of services includes but not limited to cost of facilities directly utilized in providing
the service such as depreciation or rental of equipment used and cost of supplies. TRUE

Write True if statement is correct or False if the statement is incorrect.
1. If the MWE earns other income subject to final tax , his SMW is taxable FALSE
2. If the MWE earns other income subject to normal tax , his SMW become taxable TRUE
3. Amount received by virtue of settlement of will litigation is not taxable income TRUE
4. The proceeds of Life insurance taken by a corporation who insured the life of its employee
who subsequently died constitute taxable income FALSE
5. Amount received as a consideration for a service rendered shall be excluded from gross
income FALSE
6. Bequest refers to real property transferred from one person to another by will FALSE
7. Income subject to treaty obligation binding upon the government of the Philippines is
exempted from taxation TRUE
8. Termination pay for any cause beyond the control of an employee is not subject to tax,
except if the dismissal is with a cause. TRUE
9. Damages for a loss of earning capacity is non-taxable TRUE
10. Actual liquidated damages are taxable FALSE

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What are some of the different types of taxes discussed in the document?

What are some of the factors that determine whether income is taxable or not?

Fitero B.

Problem 1-1 True or False

Write true if the statement is correct or false if the statement is incorrect.

Problem 2-1 True or False

Write true if the statement is correct or false if the statement is incorrect.

1. Tax administration is the enforcement of tax policy TRUE

Problem 3-1 TRUE OR FALSE

Write True if the statement is correct or False if the statement is incorrect.

1. All increases in taxpayer’s net worth are taxable income. TRUE

Problem 4-1 True or False

Write true if the statement is correct or false if the statement is incorrect.

Problem 5-3 True or False

9. Damages for a loss of earning capacity is non-taxable TRUE

10. Actual liquidated damages are taxable FALSE

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