INCOME TAXATION 7th Edition (BY: VALENCIA & ROXAS) 1

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. False – The inherent powers of Sovereign State exist and are exercised even without a
Constitution. The Constitution only provides general guidelines and limitations in the
exercise of inherent powers.
2. True
3. 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.
4. False – Not all government’s funds come from taxes.
5. True
6. True
7. False - Government agencies engaged in proprietary functions are subject tax unless
stated otherwise.
8. True
9. False – Each local government shall have the power to create its own sources of
revenues and to levy taxes.
10. False – This describes taxation as a means.
11. True
12. True
13. True
14. False – Not every government unit can exercise the power of taxation. It is exclusively
legislative in nature.
15. True
16. False – Taxation is an inherent power. The Constitution only limits the power to tax. It is
not the source of the State’s taxing power.

Problem 1 – 2 TRUE OR FALSE

1. True
2. False – Tax exemption is granted to government entities with governmental function
unless stated otherwise.
3. False – This describes the levying aspect of taxation. Tax assessment would refer to the
determination of correct taxes followed by the collection of unpaid taxes.
4. False - Just compensation clause is a Constitutional restriction on exercise of Eminent
Domain only. In taxation, a private property may be taken by the Government to satisfy
the taxpayer’s unpaid taxes.
5. True
6. True
7. True
8. True
9. False – Equity does not necessarily collection of equal amounts from each taxpayer. Tax
contribution must be fair, just, reasonable and proportionate to one’s ability to pay.

10. False – Tax assessment is part of administrative function of principal government unit
concerned.
11. False – Delegated tax power to the President involves only administrative discretion.
12. False - These powers could not be effectively performed without revenue. Revenue is
raised through taxation.
13. True
14. True
INCOME TAXATION 7th Edition (BY: VALENCIA & ROXAS) 2
SUGGESTED ANSWERS
Chapter 1: General Principles
and Concepts of Taxation

15. False – Penalty in the form of fines is imposition of amount by the police power.
16. True

Problem 1 – 3 TRUE OR FALSE

1. True
2. True
3. True
4. False – No public funds shall be appropriated for religious purposes.
5. False - In general, bills should be signed by the President to become law.
6. False – To grant tax-exemption, only majority of all the members of the congress is
needed, not two-thirds.
7. True
8. False – Taxes collected by the BIR are national taxes.
9. True
10. False – the tax evader breaks the law.
11. False – Transfers of real property classified as capital asset is subject to capital gain tax
of 6%. The revenue and asset must be used exclusively and directly for educational
purposes.
12. True
13. True
14. True
15. True
16. False – No direct double taxation because the corporation has separate and distinct
personality from the stockholders.

Problem 1 – 4 TRUE OR FALSE

1. False – Not transferrable and not assignable.
2. False – Null and void, not binding and no effect as law.
3. True
4. True
5. False – Tax rulings are not final interpretations of tax laws. The court can change them if
found contrary to law.
6. True.
7. False – Interpretations made by the executive officers are not conclusive. It can be
disregarded by the Courts if found erroneous.
8. False – “Ex post facto law” is not applicable for tax purposes.
9. True
10. False – Nonpayment of poll tax.
11. True
12. False – Doubts must be resolved in favor of the taxpayer.
13. True
14. False – Not applicable to totally unrelated taxes.
15. True

Prob. 1 – 5 Prob. 1 – 6 Prob. 1 – 7 Prob. 1 – 8 Prob. 1 – 9 Prob. 1 –

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

7. C 7. B 7. C 7. D 7. B 7. C
8. A 8. C 8. C 8. D 8. C 8. B
9. D 9. A 9. C 9. B 9. D 9. D
10. D 10. D 10. D 10. B 10. B 10. C
11. A 11. A 11. B 10. B 10. B 10. C
12. C 12. B 10. B 10. B 10. C