ACC 123 INCOME TAXATION

(Enhancement) Fundamental Principles in

Taxation
Assignment

Instruction: Write your answers in a yellow paper. For Item #17, please provide a solution and
encircle your final answer. This is to be passed on April 17, 2023 .

1. Which of the following is incorrect?

a. Taxes may be imposed retroactively by law but unless so expressed by such
law these taxes must be imposed prospectively
b. The tax laws are neither political nor penal in nature
c. The ex post facto rule is not applicable in taxation
d. None of the above

2. The city council passed a tax ordinance imposing an occupation tax or profession
or occupation of a Certified Public Accountant. JJ is the only person with such an
occupation in the city. Which of the following is correct?
a. JJ can successfully challenge the validity of the ordinance being
discriminatory since he is the only one adversely affected.
b. The ordinance violates the constitutional rule of equality in taxation.
c. The ordinance is a class of legislation since it does not subject to occupation
tax the other certified public accountants.
d. The ordinance is a valid exercise of the council’s power to enact tax ordinance
to raise revenue under the Local Government Code

3. The following constitute as double taxation, except one:

a. Both taxes are imposed in the same amount
b. Both taxes are levied for the same purpose
c. Box taxes are levied by the same taxing authority
d. Both taxes are imposed upon the same person

4. Which is not a double taxation?

a. A lessor of property pays real estate tax and income tax on the same property
b. Imposition of tax on the finished products and the raw materials used in the
production of the said finished products
c. Imposition of tax on corporate income and shareholder’s dividends from the
same corporation
d. All of the above
5. One of the following is a false statement about double taxation. Which is it?
a. There is no constitutional prohibition on double taxation
b. Direct duplicate taxation is a valid defense against a tax measure if it is violative of
the equal protection clause
c. Absence of any of the elements of direct double taxation makes it indirect
duplicate taxation
d. A 20% Final Withholding Tax on interest income on bank deposits and a 5% gross
receipts tax on banks is a direct duplicate taxation.

6. Which of the following statements is correct?

a. Indirect double taxation violates the Constitutional provision of uniformity
and equal protection
b. There is direct double taxation in taxing the income of the corporation and again
subject that portion of that income declared as dividend to final tax
c. Indirect double taxation is legal as long as there is no violation of equal
protection and uniformity clauses of the Constitution
d. All of the above

7. The usual mode(s) of avoiding occurrence of double taxation is/are?

a. Reciprocal exemption either by law or treaty
b. Tax credit of foreign taxes paid
c. Deduction for foreign-taxes paid
d. All of the above

8. A fundamental rule in taxation is that the property of one country may not be taxed
by another country. This is known as:
a. International law
b. Reciprocity
c. International comity
d. International inhibition

9. May the Philippine Government require tax withholding on the salaries of

Filipino employees working in the American Embassy in the Philippines?
a. No because this will violate the rule on international comity
 b. No because the Philippine Government would impose the requirement of tax
withholding on the salaries of Filipino employees working in the Philippine
Embassy in the Philippines, this would in effect require that the
American government be constituted as the withholding agent of the
Philippine
government insofar as the taxes on the salaries of the Filipino employees are
concerned
c. Both a and b
d. None of the above

10. 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 cases
c. Exemption of the government from taxes
d. Non-infringement of religious freedom and worship

11. Compliance with procedural requirements must be followed strictly to avoid

collision between the State’s power to tax and the individual’s recognized rights.
a. Due process of law
b. Equality in taxation
c. Non-infringement of religious freedom
d. Non-impairment of obligations and contracts

12. No person shall be imprisoned for nonpayment of this

a. Property tax
b. Excise tax
c. Poll tax
d. Income tax

13. This requires that all subjects or objects of taxation similarly situated are to
be treated alike or put on equal footing both in privileges and liabilities
a. Due process
b. Uniformity
c. Progressive taxation
d. None of the choices

14. No law granting any tax exemption shall be passed without the concurrence of—
a. Majority of all members of the Congress
 b. 2/3 vote of all members of the Congress
c. ¾ vote of all members of the Congress
d. Unanimous vote of all members of the Congress

15. Harvent School a non-stock non-profit educational institution bought from Pins a
resident citizen her residential house and lot. Pins would be using the proceeds of the
sale to buy her new residential house and lot. On the other hand, the school will use
the parcel of land to construct a new building for its dormitory for its medical
students. Which of the following statements regarding liability for the payment of
capital gains tax is correct?
I. Pins is liable for capital gains tax. However if what was sold was her
principal residence, she may apply for tax exemption, provided that she
complies with the requirements laid down in the Tax Code.
II. Pins is not liable to pay capital gains tax because the sale was made in favor
of a non-stock, non-profit educational institution and that the property will be
used for educationally-related functions
III. Pins is liable of capital gains tax because the tax is imposed on the seller;
thus,notwithstanding any exemption enjoyed by the buyer the tax shall still be
imposed.
a. I only
b. II only
c. I and II only
d. I and III only

16. As an incentive for investors, a law was passed giving newly established companies in
certain economic zone exemption from all taxes, duties, fees, imposts and other changes
for a period of 3 years. Ayala Corporation was organized and was granted such
incentive.in the course of business, Ayala purchased mechanical equipment from
Gokongwei Inc. The latter in it ordinary business dealings is subject to vat. Gokongwei
claims that since it sold the equipment to Ayala which is tax exempt. It should not be
liable to pay VAT. Is this claim tenable
a. No. Exemption from taxes is personal in nature and covers only taxes for which
the taxpayer-grantee is directly liable. VAT is a tax on the seller who is not exempt
from taxes. Since Gokongwei is directly liable for the VAT and no tax exemption
privilege is ever given to him, its claim that the sale is tax exempt is not tenable.
b. Yes exemption from tax should not be discriminatory in nature. A seller of
goods or service to tax exempt individuals or entities shall be accorded the same
exemption provided by lawyer to a buyer
 c. Yes applying uniformity rule
d. None of the above

17. Armando Castulo married with 2 dependent children received the following income for
2020:
Business Income, Philippines- P1,000,000.00
Business Income, Hong Kong- P200,000.00 Interest
Peso Deposit, MBTC- P100,000.00
Interest Dollar Deposit, BDO ($10,000 x 48) P100,000
Interest Deposit in Hongkong ( $10,000 x 8) P80,000 Prize
of Television won in a local lottery-P 50,000
PCSO/LOTTO Winnings- P2,000,000.00
Prize won in Ukraine – P300,000
Lottery in US- P100,000 Dividend,
from SMC- P600,000

Determine the taxable net income assuming he is (1) Resident Citizen; (2)
Non-Resident Citizen (3) Resident Alien (4) NRA-ETB