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NATIONAL FEDERATION OF JUNIOR PHILIPINNE INSTITUTE OF ACCOUNTANTS –

NATIONAL CAPITAL REGION

TAXATION (TAX)

1. What basic principle of a sound tax system is met when Congress evolves a
progressive system of taxation as mandated in the Constitution?
a. Fiscal adequacy c. Administrative feasibility
b. Theoretical justice d. Balanced budget

2. Which of the following is not a basic principle of a sound taxation system?


a. It should be capable of being effectively enforced.
b. It must be a progressive tax.
c. It must be sufficient to meet government expenditures and other public
needs.
d. It should be exercised to promote public welfare.

3. All of the following, except one, is an essential characteristic of a tax.


Which is the exception?
a. It is based on the ability to pay
b. It is an enforced contribution
c. It is generally payable in money
d. It is proportionate in character

4. In case of deductions and exemptions on income tax returns, doubts shall be


resolved:
a. liberally in favor of the taxpayer.
b. liberally in favor of the employer.
c. strictly against the government.
d. strictly against the taxpayer.

5. A taxpayer owns a capital asset which he plans to sell. He asks you when is
the best time to sell the asset. You advise him to sell it after twelve (12)
months after the date he acquires it because the capital gain to be recognized
is 50% only. This is an example of:
a. Tax avoidance c. Tax exemption
b. Tax evasion d. None of the choices

6. The administrator has a friend who has a background in accounting. The friend
advised him not to include in the gross estate an antique jewelry inherited by
the decedent from his mother because the BIR will not know its existence
anyway. This an example of:
a. Tax avoidance c. Tax exemption
b. Tax evasion d. None of the choices

7. Is it possible for the tax to be used partly for public and partly private
without violating the limitation that a tax must be for public purpose?
a. Yes. The purpose to be accomplished by taxation need not be exclusively
public. Although private individuals are directly benefited (e.g. giving
aid to flood victims), the tax will still be valid provided such benefit
is only incidental.
b. No. The purpose to be accomplished by taxation need to be exclusively
public. To benefit private individuals will be tantamount to deprivation
of property of those who paid the tax without due process.
c. Yes. The purpose is not important as long as the use of the tax can be
property accounted for.
d. No. The purpose shall either be public or private. It cannot be both.

8. Some franchise holders who are paying the franchise tax are being required by
an amendatory law to pay the value-added tax, while others remain subjected to
franchise tax. Which of the following constitutional provisions makes the law
unconstitutional?
a. No law shall be passed impairing the obligation of contracts.
b. The rule on taxation shall be uniform.
c. No person shall be deprived of property without due process of law.
d. None of the above.

9. Which is the best answer? A tax reform at any given time underscores the fact
that:
a. taxation is an inherent power of the state.
b. taxation is essentially a legislative power.
c. the State can and should adopt progressive taxation.
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d. taxation is a power that is very broad.

10. Except for the provision in Section 222, internal revenue taxes shall be
assessed within how many years after the last day prescribed by law for the
filing of the return?
a. Five (5) years c. Three (3) years
b. Four (4) years d. Two (2) years

11. A decedent dies on January 1, 2009. The estate tax return is filed on
September 1, 2009. When is the last day to make a valid assessment?
a. April 15, 2010 c. July 1, 2012
b. July 1, 2009 d. September 1, 2012

12. The following remedies for the collection of the taxes are available to the
Government, except:
a. distraint and levy.
b. inquiring into bank deposit accounts of taxpayers.
c. entering into compromise of tax cases.
d. enforcement of forfeiture of property.

13. The compromise offer shall be paid by the taxpayer upon filing of the
application for compromise settlement. In case of disapproval of the
application for compromise settlement, the amount paid upon filing of such
application shall be:
a. deducted from the total outstanding tax liabilities.
b. forfeited in favor of the government.
c. returned to the taxpayer with interest.
d. Subject to court litigation.

14. No credit or refund of the taxes or penalties shall be allowed unless the
taxpayer files in writing with the Commissioner a claim for credit or refund
within what period after the payment of the tax or penalty?
a. two (2) years
b. three (3) years
c. five (5) years
d. ten (10) years

15. After receiving the Formal Letter of Demand/Final Assessment Notice, a


taxpayer files a request for reconsideration on June 15, 2016. When shall be
the last day for the protest to be acted upon by the Commissioner of Internal
Revenue?
a. On or before August 14, 2016
b. On or before October 13, 2016
c. On or before December 12, 2016
d. Cannot be determined because the date the required documents are
submitted is not given.

16. It refers to a plea of re-evaluation of an assessment on the basis of newly


discovered or additional evidence that a taxpayer intends to present. It may
also involve a question of fact or of law or both.
a. Request for reinvestigation
b. Request for reconsideration
c. Request for compassion
d. Request for re-evaluation

17. For requests for reconsideration, the taxpayer shall submit all relevant
supporting documents in support of his protest within how many days from date
of filing of his letter of protest, otherwise, the assessment shall become
final.
a. sixty (60) days
b. thirty (30) days
c. fifteen (15) days
d. none of the choices

18. It is the authority of a Court higher in rank to re-examine the final order or
judgment of a lower Court which tried the case now elevated for judicial
review.
a. Original jurisdiction
b. Appellate jurisdiction
c. Judicial review
d. None of the choices

19. The CTA shall exercise exclusive appellate jurisdiction to review by appeal:

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a. Decision of the CIR in cases involving disputed assessments, refunds of
internal revenues, fees or other charges, penalties in relation thereto,
or other matters arising under NIRC or other laws administered by the BIR.
b. Inaction by the CIR in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under NIRC or other laws administered by
the BIR, where the NIRC provides a specific period for action, in which
case the inaction shall be deemed a denial.
c. Both a and b
d. Neither a nor b.

20. Certificate of Update of Exemption and Employer’s and Employee’s Information


regarding change of status shall be filed within how many days?
a. Within ten (10) days after such change or event
b. Within fifteen (15) days after such change or event
c. Within twenty-five (25) days after such change or event
d. Within thirty (30) days after such change or event

21 to 25 are based on the following: CharieYabut, senior citizen, is engaged in a


trading business. She is not VAT-registered. She is also supporting a Person
with Disability (PWD) who is the husband of her deceased sister and a legally
adopted minor child. During the first quarter of the calendar year 2016, the
following data taken from herbooks of accounts are given:
Gross sales P2,000,000.00
Sales discounts given at the time of sale (including P100,000
discount to senior citizens) 500,000.00
Beginning inventory 100,000.00
Purchases 400,000.00
Ending inventory 300,000.00
Deductible expenses (40% VAT-subject) 100,000.00
Interest income from Peso bank deposit 10,000.00
Selling price of shares of stock listed and traded through
the local stock exchange (cost isP100,000) 150,000.00
Capital loss from sale of 10% bonds (long term) 25,000.00
Gain from sale of his interest in a business 40,000.00
partnership(short term)
VAT paid first two months of the quarter 60,000.00

21. Is Ms. CharieYabut subject to VAT?


a. Yes, because her gross sales exceed the VAT threshold amount.
b. No, because senior citizens are not subject to VAT.
c. Yes, because she is engaged in trading business.
d. No, because she is not VAT-registered.

22. How much is the VAT payable?


a. P127,200.00 c. P55,200.00
b. P 67,200.00 d. None. Exempt from VAT

23. How much is the final tax on certain passive income?


a. P10,000.00 c. P2,000.00
b. P 6,000.00 d. None. Exempt from tax

24. How much shall be total personal exemptions she can deduct from his quarterly
income?
a.P150,000.00 c. P50,000.00
b. P100,000.00 d. None of the choices

25. How much is the taxable net income?


a.P1,227,500.00 c. P1,100,000.00
b. P1,200,000.00 d. None of the choices

26. Gross benefits received by officials and employees of public and private
entities shall be excluded from gross income provided that the total exemption
shall not exceed P82,000. The exclusion shall apply to:
a. 13th month pay and other benefits.
a. basic salary.
b. transportation allowance given monthly.
c. None of the choices

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27. Romelda, a Certified Public Accountant,uses cash basis in computing her


taxable income. In 2015, she performs a professional service for a client who
is unable to pay her. The unpaid professional fee of the client becomes
worthless in 2016. When can she deduct the worthless professional fee as bad
debt?
a. 2015
b. 2016
c. 2015 or 2016 depending on his choice
d. Can not be deducted in any year

28. Under the scheduler tax system of income taxation:


a. there is no need for classification as all taxpayers are subject to a
single rate.
b. there are different categories of taxable income.
c. there are different tax rates.
d. individuals are subject to tax treatment.

29. The imposition of this tax will force a closely-held corporation to declare
and pay dividends to its individual stockholders.
a. Optional corporate income
b. Minimum corporate income tax
c. Regular corporate income tax
d. Improperly accumulated earnings tax

30. Ayiesold one masterpiece which she purchased in 2013 at a cost P30,000. The
masterpiece was part of her personal collections. She sold the painting, under
the following terms:
June 1, 2016 down payment P10,000
August 1, 2016 installment due 10,000
October 1, 2016 installment due 20,000
October 1, 2017 installment due 40,000
October 1, 2018 installment due 40,000

How much would she report as gross income for 2016?


a. P15,000 c. P45,000
b. P30,000 d. P90,000

31 to 34 are based on the following: Sarah Angela Service Corporation, registered


with BIR in 2012,has the following data for the year 2016:
Gross receipts P1,000,000
Discounts given 100,000
Returns and allowances 150,000
Salaries of personnel directly involved in the
supply of services 300,000
Salaries of office personnel (including salaries
0f P100,000 given to senior citizens) 250,000

Acquisition cost of office equipment (estimated life is


5 years) 250,000
Acquisition cost of equipment used in the supply of
services (estimated life is 5 years) 300,000
Fees of consultants directly involved in the
supply of services 50,000
Rental of equipment directly used in the
supply of services 70,000
Assistance given to a state university under the
Adopt-A-School Program 100,000
Other operating expenses 120,000

31. How much is the total cost of services?


A. P670,000 c. P480,000
B. P540,000 d. None of the choices

32. How much are the total operating expenses?


a. P585,000.00 c. P520,00.00
b. P535,000.00 d. None of the choices

33. How much is the income tax due and payable using optional standard deduction?
a. P63,000 c. P48,600
b. P59,400 d. None of the choices

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34. How much is the amount subject to VAT?
a. P1,000,000 c. P750,000
b. P 900,000 d. None of the choices

35. Aaron, a senior citizen who is also a PWD bought goods classified as basic
necessities from a VAT-subject person. The goods are subject to a special
discount of 25%. The seller prepared the following sales invoice:

Is the above invoice correctly prepared?


a. No. Senior citizens who are PWD are entitled to two (2) 20% discount.
b. Yes. Senior citizens have tochoose between the special discount or the 20%
discount whichever is higher.
c. No. Senior citizens are entitled to 20% discount on top of the special
discount.
d. Yes. But the senior citizens can request for additional 12% VAT-exemption.

36 and 37 are based on the following: JinLi, a domestic corporation has the following
data for three (3) years:
Normal income tax MCIT
2014 P 50,000 P 60,000
2015 P 60,000 P 55,000
2016 P100,000 P 60,000

36. How much is the tax payable in 2015?


a. P60,000 c. P50,000
b. P55,000 d. None of the choices

37. How much is the tax payable in 2016?


a. P100,000 c. P35,000
b. P 95,000 d. Zero

38. Chris, operator of an illegal horse-betting business, single, supporting a person


with disability (PWD), within the fourth degree of affinity, 25 years old and a
foster child, has the following data:
Receipts from illegal bets P500,000
Rent of space where bets are received,
net of 5% withholding tax 19,000
Salaries of assistants, gross of
creditable withholding tax 100,000
Bribe money to obtain protection from
arrest and prosecution 50,000

How much is the taxable net income?


a. P500,000 c. P281,000
b. P305,000 d. P280,000

39. A property was transferred mortis causa. The following data were gathered
from the transaction:
Fair market value, time of transfer – P500,000
Fair market value, time of death – P450,000
Consideration received when transferred – P350,000

How much shall be included in the gross estate?


a. P500,000
b. P300,000
c. P100,000
d. None of the choices

40. Mr. Julian Cruz procured a life insurance upon his own life. He designated his
estate’s executor as an irrevocable beneficiary. For estate tax purposes, the
proceeds of life insurance is:
a. included in the gross estate of Mr. Julian Cruz because when the
executor of the estate is a beneficiary the proceeds are included in
the gross estate regardless of the designation.
b. not included in the gross estate of Mr. Julian Cruz because the
designation of the beneficiary is irrevocable.
c. included in the gross estate of Mr. Julian Cruz because proceeds of
life insurance are always subject to estate tax.
d. not included in the gross estate because, as a rule, proceeds of life
insurance are generally not subject to estate tax.

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41. Which of the following cancellation or forgiveness of debt shall be included


in the gross estate of the creditor?
a. Forgiveness or cancellation of debt where the debtor did not render
service in favor of the creditor to take effect while the creditor is
alive
b. Forgiveness or cancellation of debt where the debtor rendered service in
favor of the creditor
c. Forgiveness or cancellation of debt by a creditor-corporation in favor
of a debtor-stockholder
d. Forgiveness or cancellation of debt where the debtor did not render
service in favor of the creditor to take after the creditor dies

42. Antoine Vayage, aFrench citizen, was a permanent resident of the Philippines.
He died in Paris, France. He left 100,000 shares of Philippine Long Distance
Telephone Co. (PLDT); a condominium unit at the Essensa-Taguig; a house and
lot in Paris; a lease contract over a condominium unit located in Nice,
France.

Which among the following assets shall be excluded in the Estate Tax Return to
be filed with the BIR?
a. The value of the Nice, France condominium
b. The value of the Taguig condominium
c. The value of the house and lot in Paris
d. The value of the 100,000 PLDT shares

43. Mabuhay Corporation took a keyman insurance on the life of its President, Mr.
John Lloyd Delgado, designating Mr. Delgado’s wife as its revocable
beneficiary. In the event of death of Mr. Delgado, will the insurance proceeds
form part of the gross estate of Mr. Delgado?
a.Yes, because Mrs. Delgado was designated as a revocable beneficiary.
b. No, because the premium was not paid by Mr. Delgado.
c. Yes, because the insurance proceeds form part of the benefits of
Mr.Delgado enjoyed by him as an employee of Mabuhay Corporation.
d. No, because Mr. Delgado had no interest in the proceeds at the time of
his death, hence, this is not a property that he transferred at the time
of his death.

44. The estate tax is to be computed starting from the death of the decedent
because:
a. the provisions of the NIRC of 1997 requires it.
b. the privilege to transfer properties takes place upon death.
c. it is only upon the decedent’s death that his heirs are known.
d. it is at the time of death that estate taxes are due.

45. Mr. Segundo Primero died. He was survived by his wife and two (2), Pedro and
Juan. The wife renounced her share in common property in favor of their two
children. Was the renunciation subject donor’s tax?
a. Yes, because what was renounced is her share in the conjugal partnership
or absolute community after the dissolution of the marriage in favor of
the heirs of the deceased spouse or any other person/s.
b. No, because the renunciation by the surviving spouse of his/her share in
the conjugal partnership or absolute community after the dissolution of
the marriage was not done in favor of a specified heir to the exclusion
or disadvantage of the other co-heirs.
c. Yes, because the renunciation by the surviving spouse of his/her share in
the conjugal partnership or absolute community after the dissolution of
the marriage was done in favor of specified heirs.
d. No, because, as a rule, the surviving spouse cannot renounce her share in
the conjugal partnership or absolute community after the dissolution of
the marriage.

46. AST Corporation donated a piece of land to the Municipality of Palanas,


Masbate Province for the relocation site of informal settlers. The municipal
government subdivided the property and awarded parcels to the settlers.
Houses were also built by the municipal government on the property.

Question 1 – Was the donation by AST Corporation exempt from donor’s tax?
Question 2 – Was the awarding of parcels of land to the settlers exempt from
donor’s tax?

a. Yes to both questions


b. No to both questions

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c. Yes to first question and No to second question
d. No to first question and Yes to second question

47. One of the following is an incorrect statement regarding dowry.


a. The donor must be the natural or adopting parent of the child.
b. The donee must be a legitimate, recognized natural or legally adopted
child of the donor.
c. The dowry or gift on account of marriage must be given before the
celebration of the marriage or within two (2) years thereafter.
d. The exemption allowed is to the extent of the first P10,000.

48 to 52 are based on the following: The decedent, resident alien, a married man
with a surviving spouse under conjugal partnership of gains, with the following
data died on March 1, 2014:
Real properties
Family lot acquired by the decedent before marriage, FMV P 500,000.00
Family house built using the salary earned by the
surviving spouse during the marriage, FMV 900,000.00
Coconut farm inherited by the surviving spouse
during the marriage, FMV 100,000.00
Mango orchard, FMV 800,000.00
Personal properties
Bank deposit under the name of the decedent
representing salary earned before marriage 2,150,000.00
Gold necklace inherited by the surviving spouse
during the marriage 120,000.00
Several pieces of jewelry acquired during the
marriage using the exclusive money of the
decedent 300,000.00

The following expenses/deductions are claimed:


Funeral expenses (40% shouldered by relatives) 100,000.00
Judicial expenses (including P50,000.00 lawyer’s fee incurred
on September 5, 2014) 120,000.00
A piece jewelry lost through theft on August 15, 2014 50,000.00
Gambling debts of the decedent 70,000.00
Unpaid realty tax (coconut farm) for the three (3) quarters
of 2014 150,000.00
Claims against an insolvent debtor (25% can be collected) 80,000.00
Medical expenses 600,000.00

48. How much is the conjugal properties?


a. P1,780,000.00 c. P900,000
b. P1,700,000.00 d. None of the choices

49. How much is the exclusive properties?


a. P2,950,000.00 c. P450,000
b. P 650,000.00 d. None of the choices

50. How much is the family home deduction?


a. P1,000,000.00 c. P700,000
b. P 950,000.00 d. None of the choices

51. How much is the total ordinary deductions (excluding share of surviving spouse)?
a. P460,000.00 c. P260,000
b. P310,000.00 d. None of the choices

52. How much is the taxable net estate?


a. P1,225,000.00 c. P1,125,000
b. P1,175,000.00 d. None of the choices

53. When may a VAT-registered person claim input taxes as an allowable deduction
from his income tax return?
a. Input tax from zero-rated sales c. Input tax from exempt sales
b. Input taxes from capital good d. Input taxes from export sales

54. No VAT shall be imposed to form part of the cost of goods sold destined for
consumption outside of the territorial border of the taxing authority.
a. Cross Border Doctrine c. Constructive Receipt Doctrine
b. Rule of Reciprocity d. International Comity

55. In which of the following cases shall the selling price be deemed inclusive of
VAT?

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I - If the gross selling price is based on the zonal value or market value
of the property
II - If the VAT is not billed separately

a. I only c. Both I and II


b. II only d. Neither I nor II

56. Marine food products which include fish and crustaceans are exempt from VAT.
Which of the following is not exempt from VAT?
a. Eels c. Prawns
b. Trout d. Aquarium fish

57. A VAT-registered company acquired one vehicle for land transport for the use
of an official or employee valued at P2,400,000. Which of the following
statements is correct?
a. The input tax on the purchase of the vehicle for land transport as well
as the input taxes on maintenance expenses incurred on the said vehicle
shall be allowed as input tax credit.
b. The input tax on the purchase of the vehicle for land transport as well
as the input taxes on maintenance expenses incurred on the said vehicle
shall not be allowed as input tax credit.
c. The input tax on the purchase of the vehicle for land transport shall not
be allowed as input tax credit while the input taxes on maintenance
expenses incurred on the said vehicle shall be allowed as input tax
credit.
d. The input tax on the purchase of the vehicle for land transport shall be
allowed as input tax credit while the input taxes on maintenance expenses
incurred on the said vehicle shall not be allowed as input tax credit.

58. A VAT-registered taxpayer files a claim for refund with the Large Taxpayers
Service having jurisdiction over the principal place of business. Which of the
following statements is correct?
a. The said taxpayer may also file a claim for refund with One Stop Center
of the Department of Finance.
b. The taxpayer may also file a claim for refund with the Revenue District
Office.
c. The taxpayer is precluded from filing the same claim for refund with
another office.
d. The taxpayer is entitled to refund from any Revenue District Office.

59. If a VAT-registered person issues a VAT invoice or VAT official receipt for a
VAT-exempt transaction, but fails to display prominently on the invoice or
receipt the words “VAT-exempt sale”, the transaction shall:
a. still be exempt from value-added tax.
b. become taxable and the issuer shall be liable to pay VAT thereon.
c. be effectively subject to zero percent.
d. be considered erroneous transaction and must be disregarded.

60. Who of the following is not subject to tax on winnings under


Section 126?
a. Person who wins in horse races
b. Winners from double, forecast/quinella and trifecta bets
c. Winners in cockfighting
d. Owners of winning race horses

61. International carriers doing business in the Philippines is subject to the:


a. 3% percentage tax on gross receipts derived from the transport of cargo
and/or mail from the Philippines to another country.
b. 3% percentage tax on gross receipts derived from the transport of cargo,
mail and passenger from the Philippines to another country.
c. 12% value-added tax on their gross receipts derived from the transport of
cargo from the Philippines to another country.
d. 0% percent value-added tax on their gross receipts derived from the
transport of cargo and passenger from the Philippines to another country

62 and 63 are based on the following: ABC Corporation, VAT-registered real estate
dealer, sold a residential lot on July 2, 2017 for P2,000,000, plus the output
VAT, with a monthly installment payment of P20,000, plus the output VAT. The
zonal value of the subject property at the time of sale amounted to P3,000,000.

62. Would the sale qualify under installment plan?


a. Yes, because the initial payment did not exceed 25% of the selling price.
b. No, because the amount of the initial payments were not known.

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c. Yes, because the sale had initial payments and, therefore, qualified
under installment plan.
d. No, because, as a rule, sale of real property would always be considered
sale under cash basis.

63. How much was the output tax on the installment payment?
a. P3,600 c. P2,000
b. P2,400 d. P1,600

64 to 66 are based on the following: The following data are taken from the
records of Ms. Princess Ty, not VAT-registered, who owns various businesses
for the current year 2017:

Gross sales from sale of shoes and clothes P 300,000


Gross sales from her boutique 400,000
Gross receipts from her parlor 500,000
During the month of January, the following data are presented:
Gross sales from sale of shoes and clothes P30,000
Gross sales from her boutique 40,000
Gross receipts from her parlor 50,000
64. Is Princess subject to VAT?
a. Yes, because all his transactions are VAT-subject.
b. No, because she is not VAT-registered and her aggregate gross sales and
receipts do not exceed the VAT threshold amount.
c. Yes, because once a taxpayer has several business, she is automatically
subject to VAT.
d. No, all her transactions are not VAT-subject.

65. To what percentage tax, if any, will she be subject?


a. Percentage tax on VAT-exempt persons
b. Percentage tax on domestic common carriers
c. Percentage tax on franchise grantees
d. None of the choices

66. Can Princess register her transactions under the VAT system?
a. Yes. Any person who is VAT-exempt under Section 109 (w) not required to
register for VAT may elect to be VAT-registered by registering optionally
under the VAT system.
b. No. Any person who is VAT-exempt cannot optionally register her
transactions which would have been exempt from VAT under the VAT system.
c. Yes. As a rule, it is mandatory for all taxpayers with several VAT-
subject transactions to register them under the VAT system.
d. No. It is unwise to register because the taxpayer cannot claim input tax
credits.

67. Neither of us (is/are) capable of changing what is in the Revenue Regulations.


a. Is c. Either is or are
b. Are d. Neither is nor are

68. The newly released Revenue Regulations (affected/effected) small businesses.


a. Affected c. Either affected or effected
b. Effected d. Neither affected nor effected

69. Please come and see me (every/any/each) day you like to discuss the financial
statements for the current year.
a. Every c. each
b. Any d. None of the choices

70. (Who/Whom) should we invite to discuss the Tax Reform Act.


a. Who c. Neither who nor whom
b. Whom d. Either who or whom

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