1. 1
INCOME TAXATION 6th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 1: General Principles
and Concepts of Taxation
CHAPTER 1
GENERAL PRINCIPLES AND CONCEPTS OF TAXATION
Problem 1 – 1 TRUE OR FALSE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
False – This describes taxation as a means.
True
True
True
False – Not every government unit can exercise the power of taxation. It is exclusively
legislative in nature.
True
False – Taxation is an inherent power. The constitution only limits the power to tax.
True
False – The benefits from taxation may or may not be experienced by the taxpayer. The
justification to collect tax is government’s survival under the “life-blood” theory.
False – Not all government’s funds come from taxes.
True
True
False - Government agencies engaged in proprietary functions are subject tax unless
stated otherwise.
True
False – Each local government shall have the power to create its own sources of
revenues and to levy taxes.
Problem 1 – 2 TRUE OR FALSE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
False – Equity does not necessarily collection of equal amounts from each taxpayer.
False – Tax assessment is part of administrative function of principal government unit
concerned.
False – Delegated tax power to the President involves only administrative discretion.
False - These powers could not be effectively performed without revenue. Revenue is
raised through taxation.
True
True
False – Penalty in the form of fines is imposition of amount by the police power.
True
False – Tax exemption is granted to government entities with governmental function
unless stated otherwise.
False – This describes the levying aspect of taxation.
False - Just compensation clause is a Constitutional restriction on exercise of Eminent
Domain only.
True
True
True
True
Problem 1 – 3 TRUE OR FALSE

2. 2
INCOME TAXATION 6th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 1: General Principles
and Concepts of Taxation
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
True
True
True
True
False – No direct double taxation because the corporation has separate and distinct
personality from the stockholders.
False – For transfer tax purposes, nonresident alien is liable only for properties located
within the Philippines
False – No public funds shall be appropriated for religious purposes.
False - All bills even if approved by the 2/3 of the congress should still be signed by the
President to become law.
False – To grant tax-exemption, only majority of all the members of the congress is
needed, not two-thirds.
True
False – Taxes collected by the BIR are national taxes.
True
False – the tax evader breaks the law.
False – Transfers of real property classified as capital asset is subject to capital gain tax
of 6%. The revenue and asset must be used directly for educational purposes.
Problem 1 – 4 TRUE OR FALSE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
True.
False – Interpretations made by the executive officers are not conclusive. It can be
disregarded by the Courts if found erroneous.
False – “Ex post facto law” is not applicable for tax purposes.
True
False – Nonpayment of poll tax.
True
False – Doubts must be resolved in favor of the taxpayer.
True
False – Not applicable to totally unrelated taxes.
True
False – Not transferrable and not assignable.
False – Null and void, not binding and no effect as law.
True
True
False – Tax rulings are not final interpretations of tax laws. The court can change them
if found contrary to law.
Prob. 1 – 5
Prob. 1 – 6
Prob. 1 – 7
Prob. 1 – 8
Prob. 1 – 9
1. C
1. C
1. A
1. C
1. C
Prob. 1 –
10
1. D

3. 3
INCOME TAXATION 6th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 1: General Principles
and Concepts of Taxation
2. A
3. B
4. B
5. D
6. C
7. A
8. D
9. D
10. A
2. C
3. B
4. A
5. B
6. C
7. A
8. D
9. A
10. C
2. C
3. C
4. C
5. D
6. B
7. B
8. A
9. A
10. B
2. B
3. C
4. C
5. A
6. B
7. D
8. D
9. B
10. B
2. C
3. D
4. D
5. B
6. D
7. B
8. C
9. D
10. B
2. C
3. C
4. B
5. C
6. B
7. C
8. B
9. D
10. C