AUF BarOps Academic Division (2016)

Coverage: Bar Exams 2005 - 2015

LAW on TAXATION
Sub- Year
Topi
# Questions Subject topi Aske
c
Suggested Answers c d
No, double taxation standing alone and not being forbidden by our
fundamental law is not a valid defense against the legality of a tax measure
(Pepsi Cola v. Tanawan, 69 SCRA
460). However, if double taxation amounts to a direct duplicate taxation, General
Dou dou
Is double taxation a valid 1 in that the same subject is taxed twice when it should be taxed but once, principl
ble ble
1 defense against the legality 2 in a fashion that both taxes are imposed for the same purpose es of 1997
taxat taxa
of a tax measure? 3 by the same taxing authority, within the same jurisdiction or taxing district, taxatio
ion tion
4 for the same taxable period and n
5 for the same kind or character of a tax then it becomes legally objectionable
for being
oppressive and inequitable.
When an item of income is General
doub dou
taxed in the Philippines and principl
Yes, but it is only a case of indirect duplicate taxation which is not legally le ble
2 the same income is taxed in es of 1997
prohibited because the taxes are imposed by different taxing authorities. taxat taxa
another country, is there a taxatio
ion tion
case of double taxation? n
The usual methods of avoiding the occurrence of double taxation are: General met
What are the usual doub
1 Allowing reciprocal exemption either by law or by treaty; principl hod
methods of avoiding the le
3 2 Allowance of tax credit for foreign taxes paid; es of s of 1997
occurrence of double taxat
3 Allowance of deduction for foreign taxes paid; and taxatio avoi
taxation? ion
4 Reduction of the Philippine tax rate . n ding
 The House of
Representatives introduced
HB 7000 which envisioned
to levy a tax on various
transactions. After the bill
was approved by the
House, the bill was sent to
the Senate as so required
by the Constitution. In the
upper house, instead of a
deliberation on the House
Bill, the Senate introduced
SB 8000 which was its own
version of the same tax. There is no violation of the constitutional requirement that all revenue bills
The Senate deliberated on should originate from the House of Representatives. What is prohibited is for
General
this Senate Bill the Senate to enact revenue measures on its own without a bill originating pow
principl limit
andapproved the same. The from the House. But once the revenue bill was passed by the House and sent er to
4 es of atio 1997
House Bill and the Senate to the Senate, the latter can pass its ownversion on the same subject matter taxat
taxatio ns
Bill were then consolidated consonant with the latter's power to propose or concur with amendments. ion
n
in the Bicameral This follows from the co-equality of the two chambers of Congress (Tolentino
Committee. Eventually, the v. Secretary of Finance, GR No. 115455, Oct. 30, 1995).
consolidated bill was
approved and sent to the
President who signed the
same. The private sectors
affected by the new law
questioned the validity of
the enactment on the
ground that the
constitutional provision
requiring that all revenue
bills should originate from
the House of
Representatives had been
 violated.
Resolve the issue.

"X" Corporation was the

recipient in 1990 of two tax Yes. The exempting statutes are both granted unilaterally by Congress in the
exemptions both from exercise of taxing powers. Since taxation is the rule and tax exemption, the
Congress, one law exception, any tax exemption unilaterally granted can be withdrawn at the
revo
exempting the company's pleasure of the taxing authority without violating the Constitution (Mactan
cati
bond issues from taxes and Cebu International Airport Authority v, Marcos, G.R No. 120082, September
General on
the other exempting the 11, 1996). pow
principl of
company from taxes in the er to
5 es of exe 1997
operation of its public Neither of these were issued by the taxing authority in a contract lawfully taxat
taxatio mpt
utilities. The two laws entered by it so that their revocation would not constitute an impairment of ion
n ing
extending the tax the obligations of contracts.
stat
exemptions were revoked
utes
by Congress before their ALTERNATIVE ANSWER:
expiry dates. No. The withdrawal of the tax exemption amounts to a deprivation of
Were the revocations property without due process of law, hence unconstitutional.
constitutional?
 The rules that have been adopted on prescription are as follows:(a) National
Internal Revenue Code - The statute of limitation for assessment of tax if a
Taxes were generally
return is filed is within three (3) years from the last day prescribed by law for
imprescriptible; statutes,
the filing of the return or if filed after the last day, within three years from
however, may provide
date of actual filing. If no return is filed or the return filed is false or Income pres pres
otherwise. State the rules
6 fraudulent, the period to assess is within TEN YEARS from discovery of the Taxatio cripti cript 1997
that have been adopted on
omission, fraud or falsity. n on ion
this score by
The period to collect the tax is within THREE YEARS from date of assessment.
(a) The National Internal
In the case, however, of omission to file or if the return filed is false or
Revenue Code;
fraudulent, the period to collect is within TEN YEARS from discovery without
need of an assessment.
(b) Tariff and Customs Code - It does not express any general statute of
limitation; it provided, however, that "when articles have entered and passed
free of duty or final adjustment of duties made, with subsequent delivery, Tariff
pres pres
(b) The Tariff and Customs such entry and passage free of duty or settlement of duties will, after the and
7 cripti cript 1997
Code; and expiration of ONE (1) YEAR, from the date of the Custom
on ion
final payment of duties, in the absence of fraud or protest, be final and s
conclusive upon all parties, unless the liquidation of Import entry was merely
tentative" (Sec 1603, TCC).
(c) Local Government Code - Local taxes, fees, or charges shall be assessed
Local
within FIVE (5) YEARS from the date they became due. In case of fraud or
Govern pres pres
(c) The Local Government intent to evade the payment of taxes, fees or charges the same maybe
8 ment cripti cript 1997
Code assessed within TEN YEARS from discovery of the fraud or intent to evade
Taxatio on ion
payment. They shall also be collected either by administrative or judicial
n
action within FIVE (5) YEARS from date of assessment (Sec. 194, LGC).
a) A global system of taxation is one where the taxpayer is required to lump
up all items of income earned during a taxable period and pay under a single General syste syst
a) Discuss the meaning of set of income tax rules on these different items of income. principl ms ems
9 the Global and Schedular A schedular system of taxation provides for a different tax treatmet of es of of of 1997
systems of taxation different types of income so that a separate tax return is required to be filed taxatio taxat taxa
for each type of income and the tax is computed on a per return or per n ion tion
schedule basis.
 b) To which system would General syste syst
you say that the method of principl ms ems
1 b) The method of taxation under the NIRC belongs to a system which is partly
taxation under the National es of of of 1997
0 secular and partly global
Internal Revenue Code taxatio taxat taxa
belongs? n ion tion
Juan, a Filipino citizen, has
immigrated to the United
States where he is now a
permanent resident. He
owns certain income-
earning property in the Juan, shall be taxed on both his income from the Philippines accordance with
Philippines from which he the schedular graduated rates of 1%, 2% and 3%. based on the adjusted gross Non
continues to derive income derived by non-resident citizens from all sources without the Pers -
substantial income. He also Philippines during each taxable year.and on his Income from the United States Income onal resi
1
receives income from his because his being a citizen makes him taxable on all Income wherever derived. Taxatio inco den 1997
1 employment in the United For the income he derives from his property in thePhilippines, Juan shall be n me t
States on which the US taxed on his net income under the Simplified Net Income Taxation Scheme tax citiz
income tax is paid. (SNITS) whereby he shall be considered as a self-employed individual. His ens
On which of the above Income as employee in the United States, on the other hand, shall be taxed in
income is the taxable, if at
all, in the Philippines, and
how, in general terms,
would such income or
incomes be taxed?
A bachelor was employed
by Corporation A on the Yes, because what is exempt from filing are those individuals who have total
first working day of January compensation income not exceeding P60.000 with the taxes correctly
inco exe
1996 on a part-time basis withheld only by one employer. In this case, even if his aggregate
Income me mpt
1 with a salary of P3,500.00 a compensation income from both his employers does not exceed P60.000 and
Taxatio tax ed 1997
2 month. He then received that total withholding taxes were correctly withheld by his employers, the fact
n retur to
the 13th month pay. In that he derives compensation income concurrently from two employers at
n file
September 1996, he anytime during the taxable year, does not exempt him from filing his income
accepted another part-time tax return (RA 7497, as implemented by RR No. 4-93).
Job from Corporation B
 from which he received a
total compensation of
P14,500.00 for the year
1996. The correct total
taxes were withheld from
both earnings.
With the withholding taxes
already paid, would he still
be required to file an
income tax return for his
1996 income?
A corporation, engaged in
real estate' development,
executed deeds of sale on
various subdivided lots.
One buyer, after going
Yes, the buyer is subject to capital gains tax on the exchange of lots on the
around the subdivision,
basis of prevailing fair market value of the property transferred at the time of
bought a corner lot with a
the exchange or the fair market value of the property received, whichever is
good view of the
higher (Section 21(e), NIRC). Real property transactions subject to capital gains
surrounding terrain. He
tax are not limited to sales but also exchanges of property unless exempted by
paid P1.2 million, and the Real
a specific provision of law. Capit exch
title to the property was Propert
1 al ang
issued. A year later, the y 1997
3 value of the lot appreciated ALTERNATIVE ANSWER: Gain e of
Taxatio
No. The exchange is not subject to capital gains tax because it is merely done Tax lot
to a market value of n
to comply with the intentions of the parties to the previous contract regarding
P1.6 million, and the buyer
the sale and acquisition of a property with a good view. This is a simple
decided to build his house
substitution of the object of sale and since the previous transaction was
thereon. Upon inspection,
already subjected to tax, no new tax should
however, he discovered
be imposed on the exchange (BIR Ruling No. 21(e) 053-89 008-95).
that a huge tower antennae
had been erected on the lot
frontage totally blocking his
view. When he complained,
the realty company
exchanged his lot with
another corner lot with an
equal area but affording a
better view.
Is the buyer liable for
capital gains tax on the
exchange of the lots?
 The gross receipts from trading business is includible as an item of income in
the corporate income tax return and subject to corporate income tax rate
During the year, a domestic based on net income.The other items of revenue will not be included in the
corporation derived the corporate income tax return. The interest from money market placements is
following items of revenue: subject to a final withholding tax of 20%; Thedividends from domestic
(a) gross receipts from a corporation are exempt from income tax; and gains from stock transactions
trading business; (b) with the Philippine Stock Exchange are subject to transaction tax which is in
interests from money lieu of the income tax. The proceeds under an insurance policy on the loss of
Do
placements in the banks; (c) goods is not an item of income but merely a return of capital hence not Dom
mes
dividends from its stock taxable. estic
tic
investments in domestic ALTERNATIVE ANSWER:The gross receipts from trading business is includible Income Corp
1 Cor
corporations; (d) gains from as an item of income in the corporate income tax return. Likewise, the gain or Taxatio orat 1997
4 stock transactions through pora
loss realized as a consequence of thereceipt of proceeds under an insurance n e
te
the Philippine Stock policy on the loss of goods will be included in the corporate income tax return Taxa
Taxa
Exchange; (e) proceeds either as a taxable gain or a deductible loss. The gain or loss is arrived at by tion
tion
under an insurance policy deducting from the proceeds of insurance (amount realized) the basis of the
on the loss of goods. In good lost (Sec. 34(a), NIRC). The net income of the corporation shall be subject
preparing the corporate to corporate income tax rate of 35%. The other items of revenue will not be
income tax return, what included in thecorporate income tax return. The interest from money market
should be the tax treatment placements is subject to a final withholding tax of 20%; dividends from
oneach of the above items? domestic corporations are exempt from income tax; and gains from stock
transactions with the Philippine Stock Exchange are subject to transaction tax
which is in lieu of the income tax.
 Three brothers inherited in
1992 a parcel of land valued
for real estate tax purposes
at P3.0 million which they
held in co-ownership. In Yes. The exchange in 1995 is a tax-free exchange so that the subsequent sale
1995, they transferred the of one of the brothers of his shares to the other two (2) brothers in 1997 will
property to a newly be subject to income tax.This is so because the tax-free exchange merely
organized corporation as deferred the recognition of income on the exchange transaction. The gain
their equity which was subject to income tax in the sale is measured by the difference between the
placed at the zonal value of selling price of the shares (P2 Million) and the basis of the real property in the
P6.0 million. In exchange hands of the transferor at the time of exchange which is the fair market value
for the property, the three of his share in the real property at the time of inheritance (Section 34(b)(2),
brothers thus each received NIRC). The net gain from the sale of shares of stock is subject to the schedular
Pers tax-
shares of stock of the capital gains tax of 10% for the first P100.000 and 20% for the excess thereof
Income onal free
1 corporation with a total par (Section 2l(d), NIRC).
Taxatio inco exch 1997
5 value of P2.0 million or, ALTERNATIVE ANSWER:The exchange effected in 1995 did not qualify as a tax-
n me ang
altogether, a total of P6.0 free exchange because there is no showing that the three brothers gained
tax e
million. No business was control of the corporation by acquiring at least 51% of the voting rights. Since
done by the Corporation, the entire gain on the exchange was previously subjected to income tax, then,
and the property the sale will also be taxable if a gain results therefrom. In the instant case, the
remainedidle. In the early sale will not be subject to any internal revenue tax other than the
part of 1997, one of the documentary stamp tax, because the seller did not realize any gain from the
brothers, who was in dire sale. The gain is measured by the difference between the amount realized
need of funds, sold his (selling price) and the basis of the property. Incidentally, the basis to him is his
shares to the two brothers share in the value of the property received at the time of exchange, which is
for P2.0 million. P2 Million, an amount, just equal to the amount realized from the sale.
Is the transaction subject to
any internal revenue tax
(other than the
documentary stamp tax)?
 An insolvent company had
an outstanding obligation
of P l00,000.00 from a
(a) The condonation of the unpaid balance of the obligation has the effect of a
creditor. Since it could not
donation made on the part of the creditor. It is obvious that the creditor
pay the debt, the creditor
merely desires to benefit the debtor and without any consideration therefore
agreed to accept payment
cancels the debt, the amount of the debt cancelled is a gift from the creditor
through dacion en pago a Daci
to the debtor and need not be included in the latter's gross income (Sec. 50,
1 property which had a Donor’s on effe
RR No. 2); 1997
6 market value of P30.000.00. Tax en ct
In the dacion en pago Pago
ALTERNATIVE ANSWER:
document, the balance of
(a) If the discharge was prompted by the insolvency of the debtor company,
the debt was condoned.
then it is a clear case of a write-off of a bad debts which has no tax
A. What is the tax effect on
consequence to the debtor.
the discharge of the unpaid
balance of the obligation on
the debtor corporation?

B. Insofar as the creditor is (b) For the difference of P70,000 the creditor shall be subject to donor's tax at
Daci
concerned, how is he the applicable rates provided for under the National Internal Revenue Code.
1 Donor’s on effe
effected tax-wise as a ALTERNATIVE ANSWER: 1997
7 consequence of the Tax en ct
(b) The write-off of the bad debt will entitle the creditor to claim the same as a
Pago
transaction? deduction from its gross income.
 Mr. Santos died intestate in
1989 leaving his spouse and
five children as the only
heirs. The estate consisted
of a family home and a
Yes, the assessments were justified because for income tax purposes, the co-
four-door apartment which
ownership of inherited property is automatically converted into an
was being rented to
unregistered partnership from the moment the said properties are used as a
tenants. Within the year, an
common fund with intent to produce profits for the heirs in proportion to
extrajudicial settlement of
their shares in the inheritance.
the estate was executed
from the heirs, each of
From the moment of such partition, the heirs are entitled already to their
them receiving his/her due
respective definite shares of the estate and the income thereof, for each of
share. The surviving spouse
them to manage and Unr
assumed administration of
dispose of as exclusively his own without the intervention of the other heirs, egis
the property. Each year, the
and, accordingly, he becomes liable individually for all taxes in connection TAX Asse tere
1 net income from the rental
therewith. If after REMEDI ssme d 1997
8 property was distributed to such partition, he allows his shares to be held in common with his co-heir ES nt Part
all, proportionately, on
under a single management to be used with the intent of making profit ners
which they paid
thereby in proportion to his share, there can be no doubt that, even if no hip
respectively, the
document or instrument were executed for the purpose, for tax purposes, at
corresponding income tax.
least, an unregistered partnership is formed (Lorenzo Ona, et al v. CIR, 45
In 1994, the income tax
SCRA 74).
returns of the heirs were
examined and deficiency
ALTERNATIVE ANSWER:
income tax assessments
No, the assessments are not justified. The mere sharing of income does not of
were issued against each of
itself establish a partnership absent any clear intention of the co-owners who
them for the years 1989 to
are only awaiting liquidation of the estate.
1993, inclusive, as having
entered into an
unregistered partnership.
Were the assessments
justified?
 Mar and Joy got married in
1990. A week before their
marriage. Joy received, by
way of donation, a
condominium unit worth
P750.000.00 from her
The events in the life of spouses. Mar and Joy, which have income tax
parents. After marriage,
incidences are the following:
some renovations were
1) Their marriage in 1990 qualifies them to claim personal exemption for
made at a cost of
married individuals; 2) Their employment in 1991 by the same company will
P150.000.00. The spouses Pers mar
make them liable to the income tax imposed on gross compensation income;
were both employed in Income onal ried
1 3) Birth of their first child in December 1992 would give rise to an additional
1991 by the same company. Taxatio inco indi 1997
9 On 30 December 1992, exemption of P5,000 for taxable year 1992;
n me vidu
4) Birth of their second child in November 1993 would likewise entitle them to
their first child was born, tax al
claim additional exemption of P5,000 raising their additional personal
and a second child was
exemptions to P 10,000 for taxable year 1993; and
born on 07 November
5) Sale of their condominium unit in 1994 shall make the spouses liable to the
1993. In 1994, they sold the
5% capital gains tax on the gain presumed to have been realized from the sale.
condominium unit and
bought a new unit.
Under the foregoing facts,
what were the events in the
life of the spouses that had
income tax incidences?
 The following transactions shall be deemed sale:
Under the Value Added tax a) Transfer, use, or consumption not in the course of business of goods
(VAT), the tax is imposed on originally intended for sale or for use in the course of business; Dee
Dee
sales, barter, or exchange b) Distribution or transfer to: med
med
of goods and services. The (1) Shareholders or investors as share in theprofits of VAT-registered persons; Value- Sale
2 Sales
VAT is also imposed on or Added s 1997
0 Tran
certain transactions (2) Creditors in payment of debt; Tax Tran
sacti
"deemed-sales". What are c) Consignment of goods if actual sale is not made within 60 days following the sacti
ons
these so-called transactions date such goods were consigned; and ons
"deemed sales'? d) Retirement from or cessation of business, with respect to inventories of
taxable goods existing as of such retirement or cessation.

A corporation files its

income tax return on a
calendar year basis.
For the first quarter of
1993, it paid on 30 May
1993 its quarterly income
The claim for refund has prescribed. The counting of the two-year prescriptive
tax in the amount of P3.0
period for filing a claim for refund is counted not from the date when the
million. On 20 August 1993,
quarterly income taxes were paid but on the date when the final adjustment
it paid the second quarterly
return or annual income tax return was filed (CIR v. TMX Sales Inc., G.R. No. clai
income tax of P0.5 million.
83736, January 15, 1992; CIR v. Phi/Am Life Insurance Co., Inc., G.R. No. TAX m Pres
2 The third quarter resulted
105208, May 29, 1995). It is obvious that the annual income tax return was REMEDI for cript 1997
1 in a net loss, and no tax was filed before January 10, 1994 because the written claim for refund was filed ES refu ion
paid. For the fourth and
with the BIR on January 10, 1994. Since the two-year prescriptive period is not nd
final return for 1993, the
only a limitation of action in the administrative stage but also a limitation of
company reported a net
action for bringing the case to the judicial stage, the petition for review filed
loss for the year, and the
with the CTA on March 02, 1996 is beyond the reglementary period.
taxpayer indicated in the
income tax return that it
opted to claim arefund of
the quarterly income tax
payments.
On 10 January 1994, the
 corporation filed with the
Bureau of Internal Revenue
a written claim for the
refund of P3.5 million.
BIR failed to act on the
claim for refund; hence, on
02 March 1996, the
corporation filed a petition
for review with the Court of
Tax Appeals on its claim for
refund of the overpayment
of its 1993 quarterly
income tax. BIR, in its
answer to the petition,
alleged that the claim for
refund was filed beyond the
reglementary period.
Did the claim for refund
prescribe?

(a) A taxpayer received, on (a) No. Before taxpayer can avail of Judicial remedy he must first exhaust
15 January 1996 an administrative remedies by filing a protest within 30 days from receipt of the
assessment for an internal assessment. It is the Adm
revenue tax deficiency. On Commissioner's decision on the protest that give the Tax Court jurisdiction inistr
Judicial exh
2 10 February 1996, the over the case provided that the appeal is filed within 30 days from receipt of ative
Remedi aust 1997
2 taxpayer forthwith filed a the Commissioner's decision. An assessment by the BIR is not the
es
rem
ion
petition for review with the Commissioner's decision from which a petition for review may be filed with edie
Court of Tax Appeals. Could the Court of Tax Appeals. Rather, it is the action taken by the Commissioner in s
the Tax Court entertain the response to the taxpayer's protest on the assessment that would constitute
petition? the appealable decision (Section 7, RA 1125).
 (b) Under the above factual
setting, the taxpayer,
instead of questioning the
assessment he received on
15 January 1996 paid, on 01
March 1996 the "deficiency Adm
tax" assessed. The taxpayer (b) No, the petition for review can not be entertained by the Court of Appeals, inistr
Judicial exh
2 requested a refund from since decisions of the Commissioner on cases involving claim for tax refunds ative
Remedi aust 1997
3 the Commissioner by are within the exclusive and primary jurisdiction of the Court of Tax Appeals
es
rem
ion
submitting a written claim (Section 7.RA1125). edie
on 01 March 1997. It was s
denied. The taxpayer, on 15
March 1997, filed a petition
for review with the Court of
Appeals. Could the petition
still be entertained?
The following are the Special Duties imposed under the
Tariff and Customs Code:
(a) Dumping Duty - This is a duty levied on imported goods where it appears
that a specific kind or
class of foreign article is being imported into or sold or is likely to be sold in
the Philippines at a price less than its fair value;
(b) Countervailing Duty - This is a duty equal to the ascertained or estimated Kind Kind
Explain briefly each of the
amount of the subsidy or bounty or subvention granted by the foreign country Tariff s of s of
special customs duties
2 on the production, manufacture, or exportation into the Philippines of any and cust cust
authorized 1997
4 under the Tariff and article likely to injure an industry in the Philippines or retard or considerable Custom om om
retard the establishment of such industry; s duti duti
Customs Code.
(c) Marking Duty - This is a duty on an ad valorem basis imposed for es es
improperly marked articles. The law requires that foreign importations must
be marked in any official language of the Philippines the name of the country
of origin of the article;
(d) Discriminatory or Retaliatory Duty - This is a duty imposed on imported
goods whenever it is found as a fact that the country of origin discriminates
against the commerce of the Philippines in such a manner as to place the
 commerce of the Philippines at a disadvantage compared with the commerce
of any foreign country.

Tariff and Customs Code

allows the Bureau of
Customs to resort to the
administrative remedy of
seizure, such as by (a) The Bureau of Customs normally avails itself of the ADMINISTRATIVE Ad
Adm
enforcing the tax lien on REMEDY of seizure, such as by enforcing the tax lien on the imported articles, mini
Tariff inistr
the imported article, and to instead of the judicial remedy when the goods to which the tax lien attaches, stra
2 and ative
the judicial remedy of filing regardless of ownership, is still in the custody or control of the Government. In tive 1997
5 an action in court. When Custom rem
the case, however, of importations which are prohibited or undeclared, the rem
s edie
does the Bureau of remedy of seizure and forfeiture may still be exercised by edie
s
Customs normally avail the Bureau of Customs even if the goods are no longer in its custody. s
itself;
(a) of the administrative,
instead of the judicial
remedy, or
 (b) On the other hand, when the goods are properly released and thus beyond
judic judi
the reach of tax lien, the government can seek payment of the tax liability Tariff
ial cial
2 (b) of the latter, instead of through judicial action since the tax liability of the importer constitutes a and
rem rem 1997
6 the former, remedy? personal debt to the government, therefore, enforceable by action. In this Custom
edie edie
case judicial remedy is normally availed of instead of the administrative s
s s
remedy.
Fun
The following are the fundamental principles governing real property taxation: Fund dam
1) Real property shall be appraised at its current and fair market value; Real ame enta
State the fundamental
2) Real property shall be classified for assessment purposes on the basis of its Propert ntal l
2 principles underlying real
actual use:3) Real property shall be assessed on the basis of a uniform y princ prin 1997
7 property taxation in the
classification within each local government unit;4) The appraisal, assessment, Taxatio iples cipl
Philippines.
levy, and collection of real property tax shall not be let to any private person; n (RPT es
and5) The appraisal and assessment of real property shall be equitable. ) (RPT
)
The remedies available to the local government units to enforce collection of
taxes, fees, and charges are: Local
Give the remedies available
1) ADMINISTRATIVE REMEDIES of distraint of personal property of whatever Govern rem coll
2 to local government units
kind whether tangible or intangible, and levy of real property and interest ment edie ecti 1997
8 to enforce the collection of
therein; and Taxatio s on
taxes, fees, and charges?
2) JUDICIAL REMEDY by institution of an ordinary civil action for collection n
with the regular courts of proper jurisdiction.
 Uniformity in the imposition and/or collection of taxes means that all taxable
articles, or kinds of property of the same class shall be taxed at the same rate.
The requirement of uniformity is complied with when the tax operates with
the same force and effect in everyplace where the subject of it is found
(Churchill & Tail v. Conception, 34 Phil. 969). It does not mean that lands,
chattels, securities, income, occupations, franchises, privileges, necessities
and luxuries shall be assessed at the same rate. Different articles maybe taxed
at different amounts provided that the rate is uniform on the same class General Colle
Explain the requirement of
everywhere with all people at all times. Accordingly, singling out one Principl ction Unif
uniformity as a limitation in
1 particular class for taxation purposes does not infringe the requirement of es OF of orm 1998
the imposition and/or
uniformity. Taxatio Taxe ity
collection of taxes.
FIRST ALTERNATIVE ANSWER:The criteria is met when the tax laws operate n s
equally and uniformly on all persons under similar circumstances. All persons
are treated in the same manner, the conditions notbeing different, both in
privileges conferred and liabilities imposed. Uniformity in taxation also refers
to geographical uniformity. Favoritism and preference is not allowed.
SECOND ALTERNATIVE ANSWER:A tax is deemed to have satisfied the
uniformity rule when it operates with the same force and effect in every place
where the subject maybe found. (Phil. Trust & Co. v. Yatco, 69 Phil.420).

From what sources of

income are the following
Sour
persons/corporations taxa
Income ces
taxable by the Philippine 1) A citizen of the Philippines residing therein is taxable on all income derived ble
2 Taxatio of 1998
government? from sources within and without the Philippines. inco
n Inco
me
me
1) Citizen of the Philippines
residing therein;
taxa
Income Sour
2) A nonresident citizen is taxable only on income derived from sources within ble
3 2) Non-resident citizen; Taxatio ces 1998
the Philippines. inco
n of
me
 Inco
me
3) An individual citizen of Sour
taxa
the Philippines who is 3) An individual citizen of the Philippines who is working and deriving income Income ces
ble
4 working and deriving from abroad as an overseas contract worker is taxable only on income from Taxatio of 1998
inco
income from abroad as an sources within the Philippines. n Inco
me
overseas contract worker; me
Sour
taxa
4) An alien individual, Income ces
4) An alien individual, whether a resident or not of the Philippines, is taxable ble
5 whether a resident or not Taxatio of 1998
only on income derived from sources within the Philippines inco
of the Philippines; n Inco
me
me
Sour
taxa
Income ces
5) A domestic corporation is taxable on all income derived from sources within ble
6 5) A domestic corporation; Taxatio of 1998
and without the Philippines. inco
n Inco
me
me
State whether the following
transactions are a) VAT
Exempt, b) subject to VAT Cove Cov
at 10%; or c) subject to VAT 1) VAT exempt. Sale of agricultural products, such as fresh vegetables, in their Value- red ered
7 at 0%: original state, of a kind generally used as, or producing foods for human Added Tran Tran 1998
1) Sale of fresh vegetables consumption is exempt from VAT. (Section 109(c), NIRC). Tax sacti sacti
by Aling Ining at on on
thePamilihang Bayan ng
Trece Martirez.
2) Services rendered by
Jake's Construction Cove Cov
2) VAT at 0%. Since Jake's Construction Company has rendered services to the
Company, a contractor to Value- red ered
World Health Organization, which is an entity exempted from taxation under
8 the World Health Added Tran Tran 1998
international agreements to which the Philippines is a signatory, the supply of
Organization in the Tax sacti sacti
services is subject to zero percent (0%) rate. (Sec. 108[B1(3), NIRC).
renovation of its offices in on on
Manila.
 Cove Cov
3) Sale of tractors and other 3) VAT at 10%. Tractors and other agricultural implements fall under the
Value- red ered
agricultural implements by definition of goods which include all tangible objects which are capable of
9 Added Tran Tran 1998
Bungkal Incorporated to pecuniary estimation (Sec. 106[A1(1), NIRC, the sales of which are subject to
Tax sacti sacti
local farmers. VAT at 10%.
on on
Cove Cov
4) Sale of RTW by Cely's
4) This is subject to VAT at 10%. This transaction also falls under the definition Value- red ered
1 Boutique, a Filipino dress
of goods which include all tangible objects which are capable of pecuniary Added Tran Tran 1998
0 designer, in her dress shop
estimation (Sec. 106[A1(1), NIRC, the sales of which are subject to VAT at 10%. Tax sacti sacti
and other outlets.
on on
5) Fees for lodging paid by 5) VAT Exempt. The monthly fee paid by each student falls under the lease of
Cove Cov
students to Bahay-Bahayan residential units with a monthly rental per unit not exceeding Php 8,000,
Value- red ered
1 Dormitory, a private entity which Is exempt from VAT regardless of the amount of aggregate rentals
Added Tran Tran 1998
1 operating a student received by the lessor during the year. (Sec. 109(x), NIRC). The term unit shall
Tax sacti sacti
dormitory (monthly fee mean per person in the case of dormitories, boarding houses and bed spaces
on on
PI,500). (Sec. 4.103-1, RRNo. 7-95).
Arnold , who is single,
cohabits with Vilma, who is
legally married to Zachary.
Arnold and Vilma have six
Hea
minor children who live and
1) Yes. An unmarried man who has illegitimate minor children who live with Income Exe d of
1 depend upon Arnold for
him and depend upon him for their chief support is considered as "head of the Taxatio mpti the 1998
2 their chief support. The
family" (RR No. 2-98 implementing Section 35, NIRC). n ons Fam
children are not married
ily
and not gainfully employed.
1) For income tax purposes,
may Arnold be considered
as "head of a family?"
2) Is Arnold entitled to Hea
2) No. Arnold is only entitled to deduct additional personal exemption for four
deduct from his gross Income Exe d of
1 (4) out of the six (6) illegitimate children. The maximum number of
income, an additional Taxatio mpti the 1998
3 dependents for purposes of the additional personal exemption is four. (Sec.
exemption for each of his n ons Fam
35, NIRC).
illegitimate child? ily
 The requisites for deducibility of a loss are 1) loss belongs to the taxpayer; 2) Ded
General
actually sustained and charged off during the taxable year; 3) evidenced by a ucti
principl Ded
1 Give the requisites for closed and completed transaction; 4) not compensated by Insurance or other bilit
es of uctio 1998
4 deducibility of a loss. forms of indemnity; 5) not claimed as a deduction for estate tax purposes in y of
taxatio ns
case of individual taxpayers; and 6) if it is a casualty loss it is evidenced by a a
n
declaration of loss filed within 45 days with the BIR. loss
1. The proper allowance of depreciation of any property used in trade or
Pro
business refers to the reasonable allowance for the exhaustion, wear and tear
per
(including reasonable allowance for obsolescence) of said property. The
allo
reasonable allowance shall include, but not limited to, an allowance computed General
1 What is the proper wan
under any of the following methods: principl Depr
1 allowance for depreciation ce
(a) straight-line method; es of eciat 1998
5 of any property used in of
(b) declining-balance method; taxatio ion
trade or business? Dep
(c) sum-of-years-digit method; and n
reci
(d) any other method which may be prescribed by the Secretary of Finance
atio
upon recommendation of the Commissioner of Internal Revenue (Sec. 34(F).
n
NIRC).
Pro
per
2 What is the annual
allo
depreciation of a General
2. The annual depreciation of the depreciable fixed asset may be computed on wan
depreciable fixed asset with principl Depr
1 the straight-line method which will allow the taxpayer to deduct an annual ce
a cost of P100,000 and an es of eciat 1998
6 estimated useful life of 20 depreciation of Php4,500, arrived at by dividing the depreciable value (Php of
taxatio ion
l00.000-Phpl0.000) of Php90,000 by the estimated useful life (20 years). Dep
years and salvage value of P n
reci
10,000 after its useful life?
atio
n
 The Commissioner of Internal Revenue is authorized to inquire into the bank
deposits of: 1 ) a decedent to determine his gross estate;2 ) any taxpayer who
has filed an application for compromise of his tax liability by means of financial
incapacity to pay his tax liability (Sec. 6(F). NIRC).3 ) Where the taxpayer has
signed a waiver authorizing the Commissioner or his duly authorized
Can the Commissioner of representatives to Inquire into the bank deposits.(Note: This answer was not secr
secr
Internal Revenue inquire part of the answers enumerated in the UP Law Answers to the Bar in this but ecy
ecy
into thebank deposits of a was later added in the recent UP Law Answers to the Bar as a result of AMLA of
Judicial of
1 taxpayer? If so, does this Law of 2001) ban
Remedi bank 1998
7 power of theCommissioner The limited power of the Commissioner does not conflict with R.A. No. 1405
es depo
k
conflict with R.A. 1405 because the provisions of the Tax Code granting this power is an exception to dep
sit
(Secrecy of BankDeposits the Secrecy of Bank Deposits Law as embodied in a later legislation. osit
law
Law) Furthermore, in case a taxpayer applies for an application to compromise the law
payment of his tax liabilities on his claim that his financial position
demonstrates a clear inability topay the tax assessed, his application shall not
be considered unless and until he waives in writing his privilege under R.A. No.
1405, and such waiver shall constitute the authority of the Commissioner to
inquire into the bank deposits of the taxpayer.
 Yes. The BIR is authorized to collect estate tax deficiency through the
summary remedy of levying upon and sale of real properties of a decedent,
without the cognition and authority of the court sitting in probate over the
Is the BIR authorized to supposed will of the deceased, because the collection of estate tax is
collect estate tax executive in character. As such the estate tax is exempted from the
deficiencies by the application of the statute of non-claims, and this is justified by the necessity of
esta
summary remedy of levy government funding, immortalized in the maxim that taxes are the lifeblood
sum te
upon and sale of real of the government (Marcos v. CIR, G.R. No. 120880, June 5, 1997). TAX
1 mary tax
properties of the decedent ALTERNATIVE ANSWER: REMEDI 1998
8 without first securing the rem defi
Yes, if the tax assessment has already become final, executory and ES
edy cien
authority of the court enforceable. The approval of the court sitting in probate over the supposed
cy
sitting in probate over the will of the deceased is not a mandatory requirement for the collection of the
supposed will of the estate tax. The probate court is determining issues which are not against the
decedent? property of the decedent, or a claim against the estate as such, but is against
the interest or property right which the heir, legatee, devisee, etc. has in the
property formerly held by the decedent. (Marcos v. CIR, G.R, No.120880, June
5, 1997).
 Ace Tobacco Corporation The donation by Ace Tobacco Corporation is exempt from the donor's tax
bought a parcel of land because it qualifies as a gift to or for the use of any political subdivision of the
situatedat Pateros and National Government (Section 101(2), NIRC). The conveyance is likewise
donated it to the Municipal exempt from documentary stamp tax because it is a transfer without
Government ofPateros for consideration.
the sole purpose of Since the donation is to be used as a relocation site for the less fortunate
devoting the said land as constituents of the municipality. It may be considered as an undertaking for
arelocation site for the less human settlements,hence the value of the land may be deductible in full from
fortunate constituents of the gross income of Ace Tobacco Corporation if in accordance to a National
saidmunicipality. In Priority Plan determined by the National Economic Development Authority.
accordance therewith, the (Sec. 34{H](2)(a), NIRC). If the utilization is not in accordance to a National
Municipal Governmentof Priority Plan determined by the National Economic Development Authority,
Pateros issued to the then Ace Tobacco Corporation may deduct the value of the land donated only
occupants/beneficiariesCert to the extent of five (5%) percent of its taxable income derived from trade or
ificates of Award giving to business as computed without the benefit of the donation. (Sec. 34[H](2)(a) in Real exe
them the respective relation to Sec. 34[H](1), NIRC). Propert mpti don
1
areaswhere their houses The Municipality of Pateros is not subject to any donor's tax on the value of y on/d or's 1998
9 are erected. Through land it subsequently donated, it being exempt from taxes as a political Taxatio educ tax
Ordinance No. 2,Series of subdivision of the National Government. The n tions
1998, the said municipal occupants/beneficiaries are subject to real property taxes because they now
government ordained own the land.
thatthe lots awarded to the ALTERNATIVE ANSWER on Taxability of Municipality and Awardees:The
awardees/donees be awarding by the Municipal Government of lots to specific awardees or donees
finallytransferred and is likewise exempt from the donor's tax because it is only an implementation
donated to them. of the purpose for which the property was given by Ace Tobacco Corporation.
Determine the The purpose of the first donation is to devote the land as a relocation site for
taxconsequence of the the less fortunate constituents. If later on the Municipality gives out
foregoing dispositions with Certificates of Award over specific lots occupied by thequalified
respect toAce Tobacco occupants/beneficiaries, this is intended to perpetuate the purpose of the
Corporation, the Municipal previous donor, the Municipality acting merely as a conduit and not the true
Government ofPateros, and donor. This is simply a donation by the Municipality in form but not in
the substance.
occupants/beneficiaries. The receipt by the occupant beneficiaries of their respective lots through the
 Certificate of Award has no tax implications. They are, however, liable for real
property taxes.

Capit Capi
1. What is the difference CAPITAL GAINS are gains realized from the sale or exchange of capital assets, Real
2 al tal
between capital gains and while ORDINARY GAINS refer to gains realized from the sale or disposition of Propert 1998
0 Gain Gain
ordinary gains? ordinary assets. y
s vs. s vs.
 Taxatio ordi ordi
n nary nary
gains gain
s

The term ordinary income includes any gain from the sale or exchange of
property which is not a capital asset. These are the gains derived from the sale
or exchange of property such as stock in trade of the taxpayer or other
property of a kind which would properly be included in the inventory of the
Real
taxpayer if on hand at the close of the taxable year, orproperty held by the ordi
Propert cov
2 2. What does the term taxpayer primarily for sale to customers in the course of his trade or business, nary
y erag 1998
1 "ordinary income" include? or property used in trade or business of a character which is subject to the
Taxatio
inco
e
allowance for depreciation, or real property used in trade or business of the me
n
taxpayer. (Sec. 22 [Z] in relation to Sec. 39[A](1), both of the NIRC).
ALTERNATIVE ANSWER:The term ordinary income includes income from
performance of services, whether professional or personal, gains accruing
from business, and profit arising from the sale or exchange of ordinary assets.

An individual taxpayer who pro

owns a ten (10) door pert
apartment with a monthly Real y
No. The seller is not liable to pay the capital gains tax because the property
rental of P10,000 each Propert sold
2 sold is an ordinary asset, i.e. real property used in trade or business. It is
residential unit, sold this y sale is 1998
2 apparent that the taxpayer is engaged in the real estate business, regularly
property to another Taxatio ordi
renting out the ten (10) door apartment.
individual taxpayer. Is the n nary
seller liable to pay the asse
capital gains tax? t
 1 ) It depends. If the prize is considered as winnings derived from sources
within the Philippines, it is subject to withholding of final tax (Sec. 24[B] in
relation to Sec. 57[A], NIRC). If derived from sources without the Philippines, it
is not subject to withholding of final tax because the Philippine tax law and
regulations could not reach out to foreign
jurisdictions.
Is the prize of one million 2 ) The tax shall be withheld by the Reader's Digest or local agent who has
pesos awarded by the control over the payment of the prize. read
Reader's Digest subject to 3 ) Any person required to withhold or who willfully fails to withhold, shall, in with er's
Income
2 withholding of final tax? addition to the other penalties provided under the Code, be liable upon holdi dige
Taxatio 1998
3 Who is responsible for conviction to a penalty equal to the total amount of tax not withheld (Sec. ng st
n
withholding the tax? What 251, NIRC). In case of failure to withhold the tax or in case of under tax awa
are the liabilities for failure withholding, the deficiency tax shall be collected from the payor/withholding rd
to withhold such tax? aget (1st par., Sec. 2.57 [A], R.R. No. 2-98).
Any person required under the Tax Code or by rules and regulations to
withhold taxes at the time or times required by law or rules and regulations
shall, in addition to other penalties provided by law, upon conviction be
punished by a fine of not less than Ten thousand pesos (Php 10.0OO) and
suffer imprisonment of not less than one (1) year but not more than ten (10)
years (1st par., Sec. 255, NIRC).
MC Garcia, a contractor
who won the bid for the
construction of a public
highway, claims as
Local
expenses, facilitation fees No. The alleged facilitation fees which he claims as standard operating facil
Govern dedu
2 which according to him is procedure in transactions with the government comes in the form of bribes or itati
ment ction 1998
4 standard operating "kickback" which are notallowed as deductions from gross income (Section
Taxatio s
on
procedure in transactions 34(A)(l)(c), NIRC). fees
n
with the government. Are
these expenses allowable
as deduction from gross
income?
 1) No, provided the recipient candidate had complied with the requirement
for filing of returns of contributions with the Commission on Elections as
Are contributions to a
required under the Omnibus Election Code.
candidate in an election elect elec
subject to donor's tax? On ion tion
2 2) The contributor is not allowed to deduct the contributions because the said Donor’s
the part of the contributor, cont cont 1998
5 is it allowable as a expense is not directly attributable to, the development, management, Tax
ribut ribu
operation and/or conduct of a trade, business or profession {Sec. 34[AJ(l)(a),
deduction from gross ion tion
NIRC). Furthermore, if the candidate is an
income?
incumbent government official or employee, it may even be considered as a
bribe or a kickback (Sec. 34[AJ(l)(c), NIRC).
An information was filed in
No. Criminal violations, if already filed in court, may not be compromised (Sec.
court for willful non-
204[B], NIRC). Furthermore, the payment of the tax due after apprehension
payment of income tax the
shall not constitute a valid defense in any prosecution for violation of any
assessment of which has
provisions of the Tax Code (Sec. 247(a), NIRC). Finally, there is no showing that afte
become final. The accused,
the prosecutor in the problem is a legal officer of the Bureau of Internal r
through counsel, presented Judicial com
2 Revenue to whom the conduct of criminal actions are lodged by the Tax Code. crim
a motion that he be Remedi pro 1998
6 ALTERNATIVE ANSWER: inal
allowed to compromise his es mise
No. If the compromise referred to is the civil aspect, the procedure followed is acti
tax liability subject of the
not correct. Compromise for the payment of any internal revenue tax shall be on
information. The
made only by the Commissioner of Internal Revenue or in a proper case the
prosecutor indicated his
Evaluation Board of the BIR (Sec. 204, NIRC). Applying the law to the case at
conformity to the motion. Is
bar, compromise settlement can only be effected by leave of Court.
this procedure correct?
May the Commissioner of
the Internal Revenue
No. A taxpayer who is constituted as withholding agent who has deducted and
compromise the payment
withheld at source the tax on the income payment made by him holds the with
of withholding tax (tax with
taxes as trust funds for the government (Sec. 58[D]) and is obligated to remit Income oldi
2 deducted and withheld at holdi
them to the BIR. The subsequent inability of the withholding agent to Taxatio ng 1998
7 source) where the financial ng
pay/remit the tax withheld is not a ground for compromise because the n age
position of the taxpayer tax
withholding tax is not a tax upon the withholding agent but it is only a nt
demonstrates a clear
procedure for the collection of a tax.
inability to pay the assessed
tax?
 A revenue tax is considered delinquent when it is unpaid after the lapse of the
last day prescribed by law for its payment. Likewise, it could also be Income tax deli
2 When is a revenue tax
considered as delinquent Taxatio retur nqu 1998
8 considered delinquent? where an assessment for deficiency tax has become final and the taxpayer has n n ent
not paid it within the period given in the notice of assessment.
pri
There is prima facie evidence of a false or fraudulent return when the
frau ma
taxpayer has willfully and knowingly filed it with the intent to evade a part or
What constitutes prima Judicial dule faci
2 all of the tax legally due from him (Ungab v. Cusi,, 97 SCRA 877). There must
facie evidence of a false or Remedi nt e 1998
9 fraudulent return? appear a design to mislead or deceive on the part of the taxpayer, or at least
es retur evid
culpable negligence. A mistake not culpable in respect of its value would not
n enc
constitute a false return. (Words and Phrases, Vol. 16, page 173).
e
The BIR is authorized to issue a warrant of garnishment against the bank
account of a taxpayer despite the pendency of protest (Yabes v. Flojo, 15 SCRA
278). Nowhere in the
Tax Code is the Commissioner required to rule first on the protest before he
Is the BIR authorized to
can institute collection proceedings on the tax assessed. The legislative policy
issue a warrant of ban
is to give the Commissioner much latitude in the speedy and prompt collection
garnishment against the k
of taxes because it is in taxation that the Government depends to obtain the
bank account of a taxpayer Judicial garni acco
3 means to carry on its operations (Republic u. Tim Tian Teng Sons, Inc., 16 SCRA
despite the pendency of his Remedi shm unt 1998
0 protest against the 584).
es ent of
ALTERNATIVE ANSWER:
assessment with the BIR or taxp
No, because the assessment has not yet become final, executory and
appeal with the Court of ayer
demandable. The basic consideration in the collection of taxes is whether the
Tax Appeals?
assessment is final and
unappealable or the decision of the Commissioner is final, executory and
demandable, the BIR has legal basis to collect the tax liability by either
administrative or judicial action.
 I shall immediately file a motion for reconsideration of the issuance of the
CFB Corporation, a warrant of distraint and levy and seek from the BIR Commissioner a denial of
domestic corporation the protest "in clear and
engaged in food processing unequivocal language." This is so because the issuance of a warrant of
and other allied activities, distraint and levy is not considered as a denial by the BIR of the protest filed
received a letter from the by CFB Corporation (CIR v. Union Shipping Corp., 185 SCRA 547).
BIR assessing it for Within thirty (30) days from receipt of such denial "in clear and unequivocal
delinquency income taxes. language," I shall then file a petition for review with the Court of Tax Appeals. Prot
CFB filed a letter of protest. ALTERNATIVE ANSWER: est
TAX
3 One month after, a warrant Within thirty (30) days from receipt of the warrant of distraint and levy, I shall taxp of
REMEDI 1998
1 of distraint and levy was file a petition for review with the Court of Tax Appeals with an application for ayer Asse
ES
served on CFB Corporation. issuance of a writ of preliminary injunction to enjoin the Bureau of Internal ssm
If you were the lawyer Revenue from enforcing the warrant. ent
engaged by CFB This is the action I shall take because I shall consider the issuance of the
Corporation to contest the warrant as a final decision of the Commissioner of Internal Revenue which
assessment made by the could be the subject of appeal to the Court of Tax Appeals (Yobes u. Flojo, 15
BIR, what steps will you SCRA 278). The CTA may, however, remand the case to the BIR and require
take to the Commissioner to specifically rule on the protest. The decision of the
protect your client? Commissioner, if adverse to my client, would then constitute an appealable
decision.
No. Assessment is not necessary before a taxpayer maybe prosecuted if there
Is assessment necessary is a prima facie showing of a willful attempt to evade taxes as in the taxpayer's
before a taxpayer may be failure to declare a specific item of taxable income in his income tax returns crimi
prosecuted for willfully (Ungab v. Cusi 97 SCRA 877). On the contrary, if the taxes alleged to have been Judicial nal tax
3
attempting in any manner evaded is computed based on reports approved by the BIR there is a Remedi pros evas 1998
2 to evade or defeat any tax presumption of regularity of the previous payment of taxes, so that unless and es ecuti ion
imposed by the Internal until the BIR has made a final determination of what is supposed to be the on
Revenue Code? correct taxes, the taxpayer should not be placed in the crucible of criminal
prosecution (CIR v. Fortune Tobacco Corp., GR No. 119322, June 4, 1996).
 A Co., a Philippine
Corporation, filed its 1995
Income Tax Return (ITR) on
April 15, 1996 showing a
net loss. On November 10,
1996, it amended its 1995 The right of the BIR to assess the tax has not prescribed. The rule is that
ITR to show more losses. internal revenue taxes shall be assessed within three years after the last day
Colle
After a tax investigation, prescribed by law for the filing of the return. (Section 203, NIRC). However, if
ction
the BIR disallowed certain the return originally filed is amended substantially, the counting of the three- TAX Pres
of
1 deductions claimed by A year period starts from the date the amended return was filed. (CIR v. Phoenix Remedi cript 1999
busi
Co., putting A Co. in a net Assurance Co., Ltd., 14 SCRA 52). There is a substantial amendment in this es ion
ness
income position. As a case because a new return was filed declaring more losses, which can only be
tax
result, on August 5, 1999, done either (1) in reducing gross income or (2) in increasing the items of
the BIR issued a deficiency deductions, claimed.
income assessment against
A Co. A Co. protested the
assessment on the ground
that it has prescribed:
Decide.
A Co., a Philippine
corporation, is the owner of
machinery, equipment and App
fixtures located at its plant eal
in Muntinlupa City. The City to
No. The CTA’s devoid of jurisdiction to entertain appeals from the decision of
Assessor characterized all Local the
the City Board of Assessment Appeals. Said decision is instead appealable to
these properties as real Govern Asse Loca
the Central Board of Assessment Appeals, which under the Local Government
2 properties subject to the ment ssme l 1999
Code, has appellate jurisdiction over decisions of Local Board of Assessment
real property tax. A Co. Taxatio nt Boa
Appeals. (Caltex Phils, foe. v. Central Board of Assessment Appeals, L50466,
appealed the matter to the n rd
May 31, 1982).
Muntinlupa Board of Asse
Assessment Appeals. The ssm
Board ruled in favor of the ent
City. In accordance with RA
1125 (An Act creating the
 Court of Tax Appeals). A Co.
brought a petition for
review before the CTA to
appeal the decision of the
City Board of Assessment
Appeals. Is the Petition for
Review proper? Explain.

A, an individual, sold to B,
his brother-in-law, his lot
with a market value of
P1,000,000 for P600.000.
A's cost in the lot is The first transaction where a lot was sold by A to his brother-in-law for a price
P100.000. B is financially below its fair market value will not be subject to donor's tax if the lot qualifies
capable of buying the lot. as a capital asset. The transfer for less than adequate and full consideration, Sale
A also owns X Co., which which gives rise to a deemed gift, does not apply to a sale of property subject of
has a fast growing business. to capital gains tax. (Section 100, NIRC). However, if the lot sold is an ordinary shar
A sold some of his shares of asset, the excess of the fair market value over the consideration received shall es
stock in X Co. to his key be considered as a gift subject to the donor's tax. of
executives in X Co. These The sale of shares of stock below the fair market value thereof is subject to stoc
Donor’s
3 executives are not related the donor's tax pursuant to th provisions of Section 100 of the Tax Code. The Sale k& 1999
Tax
to A. The selling price is excess of the fair market value over the selling price is a deemed gift. sale
P3,000,000, which is the ALTERNATIVE ANSWER: of
book value of the shares The sale of shares of stock below the fair market value will not give rise to the real
sold but with a market imposition of the donor's tax. In determining the gain from the transfer, the pro
value of P5,000,000. A's selling price of the shares of stocks shall be the fair market value of the shares pert
cost in the shares sold is of stocks transferred. (Section 6, RR No. 2-82). In which case, the reason for y
P1,000,000. The purpose of the imposition of the donor's tax on sales for inadequate consideration does
A in selling the shares is to not exist.
enable his key executives to
acquire apropriety interest
in the business and have a
personal stake in its
 business.
Explain if the above
transactions are subject to
donor's tax.

A died, survived by his wife

and three children. The
estate tax was properly
paid and the estate settled Yes, the BIR is correct. In a case where the estate has been distributed to the
and divided and distributed heirs, the collection remedies available to the BIR in collecting tax liabilities of Coll
Colle
among the four heirs. Later, an estate may either (1) sue all the heirs and collect from each of them the ecti
ction
the BIR found out that the amount of tax proportionate to the inheritance received or (2) by virtue of the on
TAX of
estate failed to report the lien created under Section 219, sue only one heir and subject the property he of
4 Remedi real 1999
income received by the received from the estate to the payment of the estate tax. The BIR, therefore, tax
es prop
estate during is correct in pursuing the second remedy although this will give rise to the defi
erty
administration. The BIR right of the heir who pays to seek reimbursement from the other heirs. (CIR v. cien
tax
issued a deficiency income Pineda, 21 SCRA 105). In no case, however, can the BIR enforce the tax liability cy
tax assessment plus in excess of the share of the widow in the inheritance.
interest, surcharges and
penalties. Since the 3
children are residing
 abroad, the BIR sought to
collect the full tax
deficiency only against the
widow. Is the BIR correct?

A Co., a Philippine
corporation, received an
income tax deficiency
assessment from the BIR on
May 5, 1995. On May 31,
1995, A Co. filed its protest
with the BIR. On July 30,
1995, A Co. submitted to
the BIR all relevant
supporting documents. The Yes, the CTA has jurisdiction over the case because this qualifies as an appeal
Taxp Prot
CIR did not formally rule from the Commissioner's decision on disputed assessment. When the
ayer' est
onthe protest but on Commissioner decided tocollect the tax assessed without first deciding on the TAX
s of
5 January 25, 1996, A Co. was taxpayer's protest, the effect of the Commissioner’s action of filing a judicial REMEDI 1999
rem Asse
served a summons and a action for collection is a decision of denial of the protest, in which event the ES
edie ssm
copy of the complaint for taxpayer may file an appeal with the CTA. (Republic v. Lim Tian Teng & Sons,
s ent
collection of the tax Inc., 16 SCRA 584; Dayrit v. Cruz, L-39910, Sept. 26, 1988).
deficiency filed by the BIR
with the Regional Trial
Court (RTC). On February
20, 1996, A Co. brought a
Petition for Review before
the CTA. The BIR
contendedthat the Petition
is premature since there
was no formal denial of the
 protest of A Co. and should
therefore be dismissed.
1. Has the CTA jurisdiction
over the case?

The RTC has no jurisdiction over the collection case filed by the BIR. The filing
of an appeal with the CTA has the effect of divesting the RTC of jurisdiction
Taxp Prot
over the collection case. At the moment the taxpayer appeals the case to the
ayer' est
2. Has the RTC jurisdiction Court of Tax Appeals in view of the Commissioner's filing of the collection case TAX
s of
6 over the collection case with the RTC which was considered as a decision of denial, it gives a justifiable REMEDI 1999
rem Asse
filed by the BIR? Explain. basis for the taxpayer to move for dismissal in the RTC of the Government's ES
edie ssm
action to collect the tax liability under dispute. (Yabes v. Flojo, 15 SCRA 278;
s ent
San Juan v. Vasquez, 3 SCRA 92). There is no final, executory and demandable
assessment which can be enforced by the BIR, once a timely appeal is filed.
A Co., a Philippine
corporation, received an
The CTA has jurisdiction over the case. The appealable decision is the one
income tax deficiency
which categorically stated that the Commissioner's action on the disputed
assessment from the BIR on
assessment is final Taxp Prot
November 25, 1996. On
and, therefore, the reckoning of the 30-day period to appeal was on June 9, ayer' est
December 10, 1996, A Co. TAX
1999. The filing of the petition for review with the CTA was timely made. The s of
7 filed its protest with the BIR REMEDI 1999
Supreme Court has ruled that the CIR must categorically state that his action rem Asse
On May 20, 1997, the BIR ES
on a disputed assessment is final; otherwise, the period to appeal will not edie ssm
issued a warrant of distraint
commence to run. That final action cannot be implied from the mere issuance s ent
to enforce the assessment.
of a warrant "of distraint and levy. (CIR v. Union Shipping Corporation, 185
This warrant was served on
SCRA 547).
A Co. on May 25, 1997. In a
letter dated June 4, 1997
 and received by A Co. 5
days later, the CIR formally
denied A Co.'s protest
stating that it constitutes
his final decision on the
matter. On July 6, 1997, A
Co. filed a Petition for
Review with the CTA. The
BIR moved to dismiss the
Petition on the ground that
the CTA has no
jurisdiction over the case.
Decide.
A Co., a Philippine
corporation, is a big
manufacturer of consumer
goods and has several
suppliers of raw materials.
The BIR suspects that some
of the suppliers are not
properly reporting their BIR
I will advise A Co. and B Co. that the BIR is justified only in getting information BIR
income on their sales to A Audi
from the former but not from the latter. The BIR is authorized to obtain Audi
Co. The CIR therefore: Income t or
information from otherpersons other than those whose internal revenue tax t or
8 1) Issued an access letter to Taxatio Inve 1999
liability is subject to audit or investigation. However, this power shall not be Inve
A Co. to furnish the BIR n stig
construed as granting the Commissioner the authority to inquire into bank stiga
information on sales and atio
deposits. (Section 5. NIRC). tion
payments to its suppliers. n
2) Issued an access letter to
a bank (CX Bank) to furnish
the BIR on deposits of some
suppliers of A Co. on the
alleged ground that the
suppliers are committing
tax evasion.
A Co., X Bank and the
suppliers have not been
issued by the BIR letter of
authority to examine. A Co.
and X Bank believe that the
BIR is on a "fishing
expedition" and come to
you for counsel. What is
your advice?
 HK Co. is a Hong Kong
corporation not doing
business in the Philippines.
It holds 40% of the shares
of A Co., a Philippine
company, while the 60% is
owned by P Co., a Filipino- P Co. should not subject the payments of the purchase price to withholding
owned Philippine tax. While the seller is a non-resident foreign corporation which is not
corporation. HK Co. also normally required to file returns inthe Philippines, therefore, ordinarily all its
owns 100% of the shares of income earned from Philippine sources is taxed via the withholding tax
B Co., an Indonesian system, this is not the procedure availing with respect to sales of shares of Sale
company which has a duly stock. The capital gains tax on the sale of shares of stock of a domestic of
licensed Philippine branch. corporation is always required to be paid through a capital gains tax return shar
Due to worldwide filed. The saleof the shares of stock of the Indonesian Corporation is not es
Capit
restructuring of the HK Co. subject to income tax under our jurisdiction because the income derived there of
al
group, HK Co. decided to from is considered as a foreign-sourced income. Income stoc
Gain
9 sell all its shares in A and B ALTERNATIVE ANSWER:Yes, but only on the shares of stocks of A Co. and only Taxatio k& 1999
Tax
Cos. The negotiations for on the portion of the purchase price, which constitutes capital gains. Under n sale
Retu
the buy-out and the signing the Tax Code of 1997, the capital gains tax imposed under Section 28(B)(5)(c) of
rn
of the Agreement of Sale is collectible via the withholding of tax at source pursuant to Section 57 of the real
were all done in the same Code. pro
Philippines. The Agreement (Note: The bar candidate might have relied on the provision of the Tax Code of pert
provides that the purchase 1997 which provides that the capital gains tax is imposed as withholding taxes y
price will be paid to HK Co's (Section 57, NIRC). This procedure is impractical and, therefore, not followed
bank account in the U. S. in practice because the buyer/ withholding agent will not be in a position to
and that little to A and B determine how much income is realized by the seller from the sale. For this
Cos. Shares will pass from reason, any of the foregoing suggested answers should be given full credit).
HK Co. to P Co. in HK where
the stock certificates will be
delivered. P Co. seeks your
advice as to whether or not
it will subject the payments
of purchase price to
 WithholdingTax. Explain
your advice.

A Co. is the wholly owned

subsidiary of B Co., a
over
nonresident German
A Co., the withholding agent of the non-resident foreign corporation is with
company. A Co. has a Taxp
entitled to claim the refund of excess withholding tax paid on the income of oldi
trademark licensing ayer'
said corporation in the Philippines. Being a withholding agent, it is the one TAX ng
1 agreement with B Co. On s
held liable for any violation of the withholding tax law should such a violation REMEDI clai 1999
0 Feb. 10, 1995, A Co. occur. In the same vein, it should be allowed to claim a refund in case of ES
rem
m
remitted to B Co. royalties edie
overwitholding. (CIR v. Wander Phils. Inc., GR No. 68378, April 15, 1988, 160 for
of P 10,000,000, which A s
SCRA 573; CIR v. Procter & Gamble PMC, 2O4 SCRA 377). refu
Co. subjected to a
nd
withholding tax of 25% or
P2,500,000. Upon advice of
 counsel, A Co. realized that
the proper withholding tax
rate is 10%. On March 20,
1996, A Co. filed a claim for
refund of P2.500.000 with
the BIR. The BIR denied the
claim on Nov. 15, 1996. On
Nov. 28, 1996, A Co. filed a
petition for review with the
CTA. The BIR attacked the
capacity of A Co., as agent,
to bring the refund case.
Decide the issue.
HK Co., is a Hong Kong
company, which has a duly
licensed Philippine branch,
engaged in trading activities
in the Philippines. HK Co.
also invested directly in
40% of the shares of stock I will advise A Co. to withhold and remit the withholding tax on the dividends.
of A Co., a Philippine While the general rule is that a foreign corporation is the same juridical entity
corporation. These shares as its branch office inthe Philippines, when, however, the corporation
with
are booked in the Head transacts business in the Philippines directly and independently of its branch, Income
1 Divid oldi
Office of HK Co. and are not the taxpayer would be the foreign corporation itself and subject to the Taxatio 1999
1 ends ng
reflected as assets of the dividend tax similarly imposed on non-resident foreign corporation. The n
tax
Philippine branch. In 1998, dividends attributable to the Home Office would not qualify as dividends
ACo. declared dividends to earned by a resident foreign corporation, which is exempt from tax.
its stockholders. Before (Marubeni Corporation v. Commissioner, GR No. 76573, September 14, 1989).
remitting the dividends to
HK Co., A Co. seeks your
advice as to whether it will
subject the remittance to
WT. No need to discuss WT
rates, if applicable. Focus
 your discussion on what is
the issue.

A Co., a Philippine For category A employees, all the benefits received on account of their
corporation, has two separation are not subject to income tax, hence no withholding tax shall be
divisions — manufacturing imposed. The benefits received under the BIR-approved plan upon meeting
and construction. Due to the service requirement and age requirement are explicitly excluded from
the economic situation, it gross income. The ex gratia payment also qualifies as an exclusion from gross
had to close its construction income being in the nature of benefit received on account of separation due
division and layoff the to causes beyond the employees' control. (Section 32(B), NIRC). The cash
employees in that division. equivalent of unused vacation and sick leave credits qualifies as part of
A Co. has a retirement plan separation benefits excluded from gross income (CIR v. Court of Appeals, GR
approved by the BIR, which No. 96O16, October 17, 1991).
Reti
requires a minimum of 50
Income Exe rem
1 years of age and 10 years of For category B employees, all the benefits received by them will also be
Taxatio mpti ent 1999
2 service in the same exempt from income tax, hence not subject to withholding tax. These are
n ons Ben
employer at the time of benefits received on account of
efits
retirement. separation due to causes beyond the employees' control, which are
There are 2 groups of specifically excluded from gross income. (Section 32(B), NIRC).
employees to be laid off: ALTERNATIVE ANSWER;
a) Employees who are at All of the payments are not subject to income tax and should not also be
least 50 years of age and subject to withholding tax. The employees were laid off, hence separated for a
has at 10 years of service at cause beyond their control. Consequently, the amounts to be paid by reason
the time of termination of of such involuntary separation are excluded from gross income, irrespective of
employment. whether the employee at the time of separation has rendered less than ten
b) Employees who do no years of service and/or is below fifty years of age.
meet either the age or (Section 32(B), NIRC).
length of service A Co. plans
to give the following:
For category (A) employees
- the benefits under the BIR
approved plan plus an ex
gratia payment of one
month of every year of
service.

For category (B) employees

- one month for every year
of service. For both
categories, the cash
equivalent of unused
vacation and sick leave
credits.

A Co. seeks your advice as

to whether or not it will
subject any of these
payments to WT. Explain
your advice.
 A Co., a Philippine
corporation, has an
executive (P) who is a
Filipino citizen. A Co. has a
subsidiary in Hong Kong (HK
Co.) and will assign P for an
indefinite period to work
full time for HK Co. P will
bring his family to reside in
HK and will lease out his
The salaries and allowances received by P are not subject to Philippine income
residence in the Philippines.
tax. P qualifies as a nonresident citizen because he leaves the Philippines for
The salary of P will be
employment requiring him to be physically present abroad most of the time Non
shouldered 50% by A Co.
during the taxable year. (Section 22(E), NIRC). A nonresident citizen is taxable Pers -
while the other 50% plus
only on income derived from Philippine sources. (Section 23, NIRC). The Income onal resi
1 housing, cost of living and
salaries and allowances received from being employed abroad are incomes Taxatio inco den 1999
3 educational allowances from without because these are compensation forservices rendered outside of n me t
ofP's dependents will be
the Philippines. (Section 42, NIRC). tax citiz
shouldered by HK Co. A Co.
However, P is taxable on rental income for the lease of his Philippine ens
will credit the 50% of P's
residence because this is an income derived from within, the leased property
salary to P's Philippine bank
being located in the Philippines.(Section 42, NIRC).
account. P will sign the
contract of employment in
the Philippines. P will also
be receiving rental income
for the lease of his
Philippine residence.
Are these salaries,
allowances and rentals
subject to the Philippine
income tax?
 Ded
Explain if the following ucti
items are deductible from ble
gross income for income 1) Interest on loans used to acquire capital equipment or machinery is a Ite
tax purposes. Disregard deductible item from gross income. The law gives the taxpayer the option to Income Ded ms
1
who is the person claiming claim as a deduction or treat as capital expenditure interest incurred to Taxatio uctio fro 1999
4 the expense. acquire property used in trade, business or exercise of a profession. (Section n ns m
1) Interest on loans used to 34(B) (3), NIRC). Gro
acquire capital equipment ss
or machinery. Inco
me
2) Depreciation for goodwill is not allowed as deduction from gross income.
While intangibles maybe allowed to be depreciated or amortized, it is only
allowed to those
Ded
intangibles whose use in the business or trade is definitely limited in duration.
ucti
(Basilan Estates, Inc. v, CIR, 21 SCRA 17). Such is not the case with goodwill.
ble
Ite
ALTERNATIVE ANSWER:
Income Ded ms
1 Depreciation of goodwill is allowed as a deduction from gross income if the
2) Depreciation of goodwill. Taxatio uctio fro 1999
5 goodwill is acquired through capital outlay and is known from experience to
n ns m
be of value to the business for only a limited period. (Section 107, Revenue
Gro
Regulations No. 2). In such case, the goodwill is allowed to be amortized over
ss
its useful life to allow the deduction of the
Inco
current portion of the expense from gross income, thereby paving the way for
me
a proper matching of costs against revenues which is an essential feature of
the income tax
system.
Explain if the following non
items are deductible from -
1 RESERVE FOR BAD DEBTS are not allowed as deduction from gross income. Gros
gross income for income Income ded
1 Bad debts must be charged off during the taxable year to be allowed as s
tax purposes. Disregard Taxatio ucti 1999
6 who is the person claiming deduction from gross income. The mere setting up of reserves will not give Inco
n ble
rise to any deduction. (Section 34(E). NTRC). me
the deduction. item
1. Reserves for bad debts. s
 2 WORTHLESS SECURITIES, which are ordinary assets, are not allowed as non
deduction from gross income because the loss is not realized. However, if -
Gros
these worthless securities are Income ded
1 s
2. Worthless securities capital assets, the owner is considered to have incurred a capital loss as of the Taxatio ucti 1999
7 Inco
last day of the taxable year and, therefore, deductible to the extent of capital n ble
me
gains. (Section 34(D)(4), NIRC). This deduction, however, is not allowed to a item
bank or trust company. (Section 34(E)(2), NIRC). s
A Co., a Philippine
corporation, issued
preferred shares of stock
with the following features:
1) Non-voting;
2) Preferred and cumulative
dividends at the rate of 10%
per annum, whether or not
in any period the amount is
covered by earnings or
projects; ded
3) In the event of The dividends are not deductible from gross income. Preferred shares shall be ucti
Gros
dissolution of the issuer, considered capital regardless of the conditions under which such shares are Income ble
1 s
holders of preferred stock issued and, therefore, dividends paid thereon are not considered 'interest' Taxatio Gro 1999
8 shall be paid in full or Inco
which are allowed to be deducted from the gross income of the corporation. n ss
me
ratably as the assets of the (Revenue Memorandum Circular No. 17-71, July 12, 1971). Inco
issuer may permit before me
any distribution shall be
made to common
stockholders; and
4) The issuer has the option
to redeem the preferred
stock.

A Co. declared dividends

on the preferred stock and
claimed the dividends as
 interests deductible from
its gross Income for income
tax purposes. The BIR
disallowed the deduction. A
Co. maintains that the
preferred shares with their
features are really debt and
therefore the dividends are
realty interests. Decide.

The power to tax is an inherent power of the sovereign which is exercised

through the legislature, to impose burdens upon subjects and objects within
its Jurisdiction for the purpose of raising revenues to carry out the legitimate Con
objects of government. The underlying basis for its exercise is governmental General Doct stitu
necessity for without it no government can exist nor endure. Accordingly, it Principl rine tion
1 has the broadest scope of all the powers of government because inthe es of of al 2000
absence of limitations, it is considered as unlimited, plenary, comprehensive Taxatio Taxa Limi
and supreme. The two limitations on the power of taxation are the inherent n tion tati
and constitutional limitations which are intended to prevent abuse on the on
exercise of the otherwise plenary and unlimited power. It is the Court's role to
see to it that the exercise of the power does not transgress these limitations.
 Mr. Pascual's income from
leasing his property reaches
the
maximum rate of tax under
the law. He donated one-
half of
his said property to a non-
stock, non-profit
educational
institution whose income
and assets are actually,
directly
Tax
and exclusively used for
There is tax avoidance. Mr. Pascual has exploited a fully permissive alternative Avoi
educational purposes, and General Doct
method to reduce his income tax by transferring part of his rental income to a dan
therefore Principl rine
tax exempt entity through a donation of one-half of the income producing ce
2 qualified for tax exemption es of of 2000
property. The donation is likewise exempt from the donor's tax. The donation vs.
under Article XIV, Section 4 Taxatio Taxa
is the legal means employed to transfer the incidence of income tax on the Tax
(3) n tion
rental income. Evas
of the Constitution and
ion
Section 30 (h) of the Tax
Code.
Having thus transferred a
portion of his said asset,
Mr.
Pascual succeeded in
paying a lesser tax on the
rental
income derived from his
property. Is there tax
avoidance or
tax evasion? Explain. (2%)
 (2000) An Executive Order
was issued pursuant to law,
granting No. Equal protection of the law clause is subject to reasonable classification.
tax and duty incentives only Classification, to be valid, must (1) rest on substantial distinctions, (2) be
to businesses and residents germane to the purpose of the law, (3) not be limited to existing conditions
within the "secured area" only, (4) apply equally to all members of the same class. Equ
of the Subic Economic al
General Doct
Special There are substantial differences between big investors being enticed to the Prot
Principl rine
Zone, and denying said "secured area" and the business operators outside that are in accord with the ecti
3 es of of 2000
incentives to those who live equal protection clause that does not require territorial uniformity of laws. on
Taxatio Taxa
within The classification applies equally to all the resident individuals and businesses of
n tion
the Zone but outside such within the "secured area". The residents, being in like circumstances to the
"secured area". Is the contributing directly to the achievement of the end purpose of the law, are Law
constitutional right to equal not categorized further. Instead, they are similarly treated, both in privileges
protection of the law granted and obligations required. (Tiu, et al, v. Court of 4npeals, et al, G.R. No.
violated 127410, January 20, 1999)
by the Executive Order?
Explain. (3%)
Article VI, Section 28 (3) of
the 1987 Philippine
Constitutionprovides that
Exe
charitable institutions,
mpt
churches and personagesor Impo
ion
covenants appurtenant This exemption applies only to property taxes. What is exempted is not the Real sitio
fro
thereto, mosques, non- institution itself but the lands, buildings and improvements actually, directly Propert n of
m
4 profitcemeteries and all and exclusively used for religious, charitable and educational purposes. y Real 2000
Real
lands, buildings and (Commissioner of Internal Revenue v. Court of Appeals, et al, G.R. No. 124043, Taxatio Prop
Pro
improvementsactually, October 14, 1998) n erty
pert
directly and exclusively Tax
y
used for religious,
Tax
charitable or
educationalpurposes shall
be exempt from taxation. a)
 To what kindof tax does this
exemption apply? (2%)

Article VI, Section 28 (3) of

the 1987 Philippine
Constitution
provides that charitable
institutions, churches and
personages
or covenants appurtenant Exe
thereto, mosques, non- mpt
Impo
profit ion
Yes, because tax exemptions are strictly construed against the taxpayer. There Real sitio
cemeteries and all lands, fro
must be evidence to show that the taxpayer has complied with the Propert n of
buildings and m
5 requirements for exemption. Furthermore, real property taxation is based on y Real 2000
improvements Real
use and not on ownership, hence the same rule must also be applied for real Taxatio Prop
actually, directly and Pro
property tax exemptions. n erty
exclusively used for pert
Tax
religious, charitable or y
educational Tax
purposes shall be exempt
from taxation. b) Is proof of
actual use necessary for tax
exemption
purposes under the
Constitution? (3%)
 Among the taxes imposed
Income tax, estate and donor's tax are considered as direct taxes. On the Acc
by the Bureau of Internal
other hand, value-added tax, excise tax, other percentage taxes, and ordi
Revenue are income tax,
documentary stamp tax are indirect ng
estate and donor's tax, General
taxes. Kind to
value-added tax, excise tax, Principl
s of bur
6 other percentage taxes, and es of 2000
DIRECT TAXES are demanded from the very person who, as intended, should Taxe den
documentary stamp tax. Taxatio
pay the tax which he cannot shift to another; while an INDIRECT TAX is s or
Classify these taxes into n
demanded in the first instance from one person with the expectation that he inci
direct and indirect taxes,
can shift the burden to someone else, not as a tax but as a part of the den
and differentiate direct
purchase price. ce
from Indirect taxes. (5%)
A domestic corporation
failed to withhold and remit
the tax
on income received from
Philippine sources by a Taxa
nonresident foreign tion Tax
corporation. In addition to No. There is no showing that the compromise penalty was imposed by the of pay
Income
the civil penalties provided Commissioner of Internal Revenue with the agreement and conformity of the resid er
7 Taxatio 2000
for under the Tax Code, a taxpayer. (Wonder Mechanical Engineering Corporation u. Court of Tax ent Rem
n
compromise penalty was Appeals, et. al., 64 SCRA 555). corp edie
imposed for violation of the orati s
withholding tax provisions. on
May the Commissioner of
Internal Revenue legally
enforce the collection of
compromise penalty? (5%)
 To start a business of his
own, Mr. Mario de
Guzmanopted for an early
retirement from a private
(a) It depends. An employee retiring under a company's qualified and private
company afterten (10)
retirement plan can only be exempt from income tax on his retirement
years of service. Pursuant
benefits if the following requisites are met: (1) that the retiring employee Gros Wit
to the company'squalified Income
must have been in service of the same employer for at least ten (10) years; (2) s hhol
8 and approved private Taxatio 2000
that he is not less than 50 years of age at the time of retirement; and(3) the Inco ding
retirement benefit plan, n
benefit is availed of only once. In the instant case, there is no mention me Tax
hewas paid his retirement
whether the employee has likewise complied with requisites number (2) and
benefit which was
(3).
subjected towithholding
tax. Is the employer correct
in withholding thetax?
Explain. (2%)
To start a business of his The conditions to be met in order that retirement benefits received by officials
own, Mr. Mario de Guzman and employees of private firms are excluded from gross income and exempt
opted for an early from taxation are as follows:
retirement from a private 2. Under Republic Act No. 4917 (those received under a reasonable private
company after benefit plan):
ten (10) years of service. a. the retiring official or employee must have been in service of the same
Pursuant to the company's employer for at least ten (10) years; Gro
qualified and approved b. that he is not less than fifty (50) years of age at the time of retirement; and ss
Gros
private retirement benefit c. that the benefit is availed of only once. Income Inco
s
9 plan, he Taxatio me 2000
Inco
was paid his retirement 3. Under Republic Act No. 7641 (those received from employers without any n Exe
me
benefit which was retirement plan): a) Those received under existing collective bargaining mpt
subjected to agreement and other agreements are exempt; and ion
withholding tax. Under b) In the absence of retirement plan or agreement providing for retirement
what conditions are benefits the benefits are excluded from gross income and exempt from
retirement benefits income tax if:
received by officials and i. retiring employee must have served at least five(5) years; and
employees of private firms ii. that he is not less than sixty (60) years of age but not more than sixty five
excluded from (65).
 gross income and exempt
from taxation? (3%)

Mr. Javier is a non-resident Wit

senior citizen. He receives a h
monthly pension from the Mr. Javier is exempt from income tax on his monthly GSIS pension (Sec. resp
GSIS which he deposits with 32(B)(6)(f), NIRC of 1997) but not on the interest income that might accrue on Gros ect
Income
1 the PNB-Makati Branch. Is the pensions deposited with PNB which are subject to final withholding tax. s to
Taxatio 2000
0 he exempt from income tax Consequently, since Mr. Javier's sole taxable income would have been Inco non
n
and therefore not required subjected to a final withholding tax, he is not required anymore to file an me -
to file an income tax income tax return. (Sec. 51 (A) (2) (c). Ibid]. resi
return? den
(5%) t
 Mr. Cortez is a non-resident
Mr. Cortez being a non-resident alien individual who has stayed for an
alien based in Hong
aggregated period of more than 180 days during the calendar year 1999, shall
Kong.During the calendar Taxa
for that taxable year be deemed to be a non-resident alien doing business in
year 1999, he came to the Taxa tion
the Philippines.Considering the above, Mr. Cortez shall be subject to an
Philippinesseveral times tion non
income tax in the same manner as an individual citizen and a resident alien
and stayed in the country Income of -
1 individual, on taxable income received from all sources within the Philippines.
for an aggregatedperiod of Taxatio non- resi 2000
1 more than 180 days. How [Sec. 25 (A) (1), NIRC of 1997]Thus, he is allowed to avail of the itemized
n resid den
deductions including the personal and additional exemptions but subject to
will Mr. Cortez betaxed on ent t
the rule on reciprocity on the personal exemptions. (Sec. 34 (A) to (J) and (M)
his income derived from alien alie
in relation to Sec. 25 (A) (1), Ibid, Sec. 35 (D), Ibid.]NOTE: It is suggested that
sources within n
full credit should be given if the examinee's answer only cover the first two
thePhilippines and from
paragraphs.
abroad? (5%)
Under Article XIV, Section 4 No. The interest income on bank deposits and yields from deposit substitutes
(3) of the 1987 Philippine are not automatically exempt from taxation. There must be a showing that the
Constitution, all revenues incomes are included in the school's annual information return and duly
and assets of non-stock, audited financial statements together with:
nonprofit 1 Certifications from depository banks as to the amount of interest income
educational institutions, earned from passive investments not subject to the 20% final withholding tax;
used actually, directly and 2 Certification of actual, direct and exclusive utilization of said income for
exclusively for educational educational purposes;
purposes, are exempt from 3 Board resolution on proposed project to be funded out of the money General Doct
Tax
taxes deposited in banks or placed in money market placements (Finance Principl rine
1 Exe
and duties. Are income Department Order No. 149-95 issued November 24, 1995), which must be es of of 2000
2 derived from dormitories, mpt
used actually, directly and exclusively for educational purposes. Taxatio Taxa
ion
canteens n tion
and bookstores as well as The income derived from dormitories, canteens and bookstores are not also
interest income on bank automatically exempt from taxation. There is still the requirement for
deposits evidence to show actual, direct and exclusive use for educational purposes. It
and yields from deposit is to be noted that the 1987 Philippine Constitution does not distinguish with
substitutes automatically respect to the source or origin of the income. The distinction is with respect to
exempt the use which should be actual, direct and exclusive for educational purposes.
from taxation? Explain. Consequently, the provisions of Sec. 30 of the NIRC of 1997, that a non-stock
(5%) and nonprofit educational institution is exempt from taxation only "in respect
 to income received by them as such" could not affect the constitutional tax
exemption. Where the Constitution does not distinguish with respect to
source or origin, the Tax Code should not make distinctions.

Exe
mpt
ions
:
General Doct
TAXABLE INCOME means the pertinent items of gross income specified in the Non
Principl rine
1 What is meant by taxable Tax Code, less the deductions and/or personal and additional exemptions, if -
es of of 2000
3 income? (2%) any, authorized for such types of income by the Tax Code or other special
Taxatio Taxa
Prof
laws. (Sec. 31, NIRC of 1997) it
n tion
Edu
cati
onal
Insti
 tuti
ons

Jose Miranda, a young artist

and designer, received a
prize Excl
of P100,000.00 for winning No. It is not includable in the gross income of the recipient because the same usio
in the on-the-spot peace is subject to a final tax of 20%, the amount thereof being in excess of P10.000 ns
Gros
poster (Sec. 24(B){1), NIRC of 1997). The prize constitutes a taxable income because it Income fro
1 s
contest sponsored by a was made primarily in recognition of artistic achievement which he won due Taxatio m 2000
4 local Lions Club. Shall the Inco
to an action on his part to enter the contest. [Sec. 32 (B) (7) (c), NIRC of 1997] n Gro
me
reward Since it is an on-the-spot contest, it is evident that he must have joined the ss
be included in the gross contest in order to earn the prize or award. Inco
income of the recipient for me
tax
purposes? Explain. (3%)
 On June 16, 1997, the
Bureau of Internal Revenue
(BIR) issued against the
Estate of Jose de la Cruz a
notice of deficiency estate
tax assessment, inclusive of
surcharge, interest and
compromise penalty. The
Executor of the Estate of
Jose de la Cruz (Executor)
filed a timely protest
against the assessment and
requested for waiver of the
surcharge, interest and
penalty. The protest was Taxp
Yes. There was no claim for refund or credit that has been duly filed with the Clai
denied by the ayer'
Commissioner of Internal Revenue which is required before a suit or Tax ms
1 Commissioner of Internal s
proceeding can be filed in any court (Sec. 229. NIRC of 1997). The denial of the Remedi for 2000
5 Revenue (Commissioner) claim by the Commissioner is the one which will vest the Court of Tax Appeals es
rem
Refu
with finality on September edie
jurisdiction over the refund case should the taxpayer decide to appeal on time nd
13, 1997. Consequently, the s
Executor was made to pay
the deficiency assessment
on October 10, 1997. The
following day, the Executor
filed a Petition with the
Court of Tax Appeals (CTA)
praying for the refund of
the surcharge, interest and
compromise penalty. The
CTA took cognizance of the
case and ordered
the Commissioner to make
a refund. The
Commissioner filed a
Petition for Review with the
Court of Appeals assailing
the jurisdiction of the CTA
and the Order to make
refund to the Estate on the
ground that no claim for
refund was filed with the
BIR.
A. Is the stand of the
Commissioner correct?
Reason. (2%)
 On June 16, 1997, the
Bureau of Internal Revenue
(BIR) issued against the
Estate of Jose de la Cruz a
notice of deficiency estate
tax assessment, inclusive of
surcharge, interest and
compromise penalty. The
Executor of the Estate of
Jose de la Cruz (Executor)
filed a timely protest
against the assessment and
requested for waiver of the
surcharge, interest and
The filing of an administrative claim for refund with the BIR is necessary in
penalty. The protest was Taxp
order: 1) To afford the Commissioner an opportunity to consider the claim and Clai
denied by the ayer'
to have a chance to correct the errors of subordinate officers (Gonzales v. Tax ms
1 Commissioner of Internal s
CTA, et al, 14 SCRA 79); and 2) To notify the Government that such taxes have Remedi for 2000
6 Revenue (Commissioner) been questioned and the notice should be borne in mind in estimating the es
rem
Refu
with finality on September edie
revenue available for expenditures. (Bermejo v. Collector, G.R. No. L 3028. July nd
13, 1997. Consequently, s
29, 1950)
theExecutor was made to
pay the deficiency
assessment on October 10,
1997. The following day,
the Executor filed a Petition
with the Court of Tax
Appeals (CTA) praying for
the refund of the surcharge,
interest and compromise
penalty. The CTA took
cognizance of the case and
orderedthe Commissioner
to make a refund. The
Commissioner filed a
 Petition for Review with the
Court of Appeals assailing
the jurisdiction of the CTA
and the Order to make
refund to the Estate on the
ground that no claim for
refund was filed with the
BIR.Why is the filing of an
administrative claim with
the BIR necessary? (3%)

Last July 12, 2000, Mr. & The conditions are:

Mrs. Peter Camacho sold 1. The proceeds are fully utilized in acquiring or constructing a new principal
their residence within eighteen (18) calendar months from the sale or disposition of
principal residence situated the principal residence or eighteen (18) months from July 12, 2000.1 The
Taxa
in Tandang Sora, Quezon historical cost or adjusted basis of the real property
tion
City sold or disposed shall be carried over to the new principal residence built or Real
Capit of
for Ten Million Pesos acquired. Propert
1 al Capi
(P10,000,000.00) with the 2 The Commissioner of Internal Revenue must have been informed by Mr. & y 2000
7 intention Gain tal
Mrs. Peter Camacho within thirty (30) days from the date of sale or disposition Taxatio
s Tax Gain
of using the proceeds to on July 12, 2000 through a prescribed return of their intention to avail of the n
s
acquire or construct a new tax exemption.
Tax
principal residence in 3 That the said exemption can only be availed of once every ten (10) years.
Aurora Hills, Baguio City. 4 If there is no full utilization of the proceeds of sale or disposition, the portion
What of the gain presumed to have been realized from the sale or disposition shall
conditions must be met in be subject to capital gains tax [Sec. 24 (D) (2), NIRC of 1997]
 order that the capital gains
presumed to have been
realized from such sale may
not be
subject to capital gains tax?
(5%)

Mr. Reyes, a Filipino citizen

engaged in the real estate
business, filed his 1994
income tax return on March
20, 1995. On December 15,
1995, he left the Philippines
as an immigrant to join his
family in Canada. After
Taxp
theinvestigation of said No. Prescription has not set in because the period of limitations for the Bureau Pres
ayer'
return/the BIR issued a of Internal Revenue to issue an assessment was SUSPENDED during the time Tax cript
1 s
notice of deficiency income that Mr. Reyes was out of the Philippines or from the period December 15, Remedi ive 2000
8 rem
tax assessment on April 15, 1995 up to December 8, 1998. (Sec. 223 in relation to Sec. 203, both of the es peri
edie
1998. Mr. Reyes returned NIRC of 1997) od
s
to the Philippines as a
balikbayan on December 8,
1998. Finding his name to
be in the list ofdelinquent
taxpayers, he filed a protest
against the assessment on
the ground that he did not
receive the notice of
 assessment and that the
assessment had prescribed.
Will the protest prosper?
Explain. (5%)

The value of the gross estate of a non-resident decedent who is a Filipino

citizen at the time of his death shall be determined by including the value at
the time of his death of all property, real or personal, tangible or intangible, Non
Discuss the rule on situs of wherever situated to the extent of the interest therein of the decedent at the -
taxation with respect to the time of his death [Sec. 85 (A), NIRC of 1997). These properties shall have a Situs resi
1 imposition of the estate tax situs of taxation in the Philippines hence subject to Philippine estate taxes. On Estate of den
2000
9 on property left behind by a the other hand, in the case of a non-resident decedent who at the time of his Tax Taxa t
non-resident decedent. death was not a citizen of the Philippines, only that part of the entire gross tion dec
(2%) estate which is situated in the Philippines to the extent of the interest therein ede
of the decedent at the time of his death shall be included in his taxable estate. nt
Provided, that, with respect to intangible personal property, we apply the rule
of reciprocity. (Ibid)
 The gross estate shall be determined by including the value at the time of his
Mr. Felix de la Cruz, a death all of the properties mentioned, to the extent of the interest he had at
bachelor resident citizen, the time of his death because he is a Filipino citizen. [Sec. 85 (A), NIRC of
suffered from a heart 1997] With respect to the life insurance proceeds, the amount includible in
attack while on a business the gross estate for Philippine tax purposeswould be to the extent of the
trip to the USA. He died amount receivable by the estate of the deceased, his executor, or
intestate on June 15, 2000 administrator, under policies taken out by decedent upon his own life,
in New York City, leaving irrespective of whether or not the insured retained thepower of revocation, or
behind real properties to the extent of the amount receivable by any beneficiary designated in the
situated in New York; his policy of insurance, except when it is expressly stipulated that the designation
family home in Valle Verde, of the beneficiary is irrevocable. [Sec. 85 (E) NIRC of 1997]The DEDUCTIONS
Pasig City; an office that may be claimed by the estate are: 1) The actual funeral expenses or in an
condominium inMakati amount equal to five percent (5%) of the gross estate, whichever is lower, but Gro
City; shares of stocks in San in no case to exceed two hundred thousand pesos (P200.000.00). [Sec. 86 (A) ss
Gros
Miguel Corporation; cash in (1) (a). NIRC of 1997] 2) The judicial expenses in the testate or intestate Esta
2 Estate s
bank; and personal proceedings.(Sec. 86(A)(1)3) The value of the decedent's family home located te 2000
0 Tax Estat
belongings. The decedent is in Valle Verde, Pasig City in an amount not exceeding one million pesos Ded
e
heavily insured with Insular (P1,000,000.00), and upon presentation of a certification of the barangay ucti
Life. He had no known captain of the locality that the same have been the decedent's family home. ons
debts at the time of his [Sec. 86 (A (4),Ibid]4) The standard deduction of P1,000,000. (Sec. 86(A)(5) 5)
death. As the sole heir and Medical expenses incurred within one year from death in an amount not
appointed Administrator, exceeding P500,000.(Sec. 86(A)(6) The ESTATE TAX RETURN shall be filed
how would you determine within six(6) months from the decedent's death (Sec. 90 (B), NIRC of 1997],
the gross estate ofthe provided that the Commissioner of Internal Revenue shall have authority to
decedent? What grant in meritorious cases, a reasonable extension not exceeding thirty (30)
deductions may be claimed days for filing the return (Sec. 90 (c), Ibid] Except in cases where the
by the estate and when and Commissioner of Internal Revenue otherwise permits, the estate tax return
where shall the return be shall be filed with an authorized agent bank, or Revenue District Officer,
filed and estate tax paid? Collection Officer, or duly authorized Treasurer of Pasig City, the City in which
(3%) the decedent Mr. de la Cruz was domiciled at the time of his death. [Sec. 90
(D). NIRC of 1997]
 Under what conditions may
Pow
the Commissioner of
ers
Internal The Commissioner of Internal Revenue may be authorized to compromise the Auth
Judicial and
2 Revenue be authorized to: payment of any internal revenue tax where: 1) A reasonable doubt as to the ority
Remedi Duti 2000
1 A. Compromise the validity of the claim against the taxpayer exists; or 2) the financial position of of
es es
payment of any internal the taxpayer demonstrates a clear inability to pay the assessed tax. CIR
of
revenue
BIR
tax? (2%)
BIR: Compromise; Pow
Conditions (2000)Under ers
The Commissioner of Internal Revenue may abate or cancel a tax liability Auth
what conditions may the Judicial and
2 when: 1) The tax or any portion thereof appears to be unjustly or excessively ority
Commissioner of Internal Remedi Duti 2000
2 assessed; or 2) The administration andcollection costs involved do not justify of
Revenue be authorized to: es es
the collection of the amount due. [Sec. 204 (B), NIRC of 1997] CIR
B. Abate or cancel a tax of
liability? (3%) BIR
A taxpayer is suspected not
to have declared his correct
gross income in his return
filed for 1997. The
examiner requested the
No. as this would be violative of Republic Act No. 1405, the Bank Deposits
Commissioner to authorize
Secrecy Law. The Commissioner of Internal Revenue or his duly authorized
him to inquire into the bank Ban
representative may be allowed to inquire or look into the bank deposits of a Othe
deposits of the taxpayer so k
taxpayer in the following cases: a) For the purpose of r
that he could proceed with Tax Secr
2 determining the gross estate of a decedent; b) Where the taxpayer has filed relat
the net worth method of Remedi ecy 2000
3 an application for ed
investigation to establish es Viol
compromise of his tax liability by reason of financial incapacity to pay such tax matt
fraud. May the examiner be atio
liability. (Sec. 6 (F), NIRC of 1997] c) Where the taxpayer has signed a waiver ers
allowed to look into the n
authorizing the Commissioner or his duly authorized representatives to
taxpayer's bank deposits?
Inquire into the bank deposits.
In what cases may the
Commissioner or his duly
authorized representative
be allowed to inquire or
look into the bank deposits
of a
taxpayer? (5%)
 The legal remedies of an aggrieved taxpayer under the Tax Code, both at the
administrative and judicial levels, may be classified into those for assessment,
collection and refund.The procedures for the ADMINISTRATIVE REMEDIES for
ASSESSMENT are as follows:a. After receipt of the Pre-Assessment Notice, he
must within fifteen (15) days from receipt explain why no additional taxes
should be assessed against him. b. If the Commissioner of Internal Revenue
issues an assessment notice, the taxpayer must administratively protest or
dispute the assessment by filing a motion for reconsideration or
reinvestigation within thirty (30) days from receipt of the notice of
assessment. (4th par.. Sec. 228, NIRC of 1997)c. Within sixty (60) days from
filing of the protest, the taxpayer shall submit all relevant supporting
documents.The JUDICIAL REMEDIES of an aggrieved taxpayer relative to an
ASSESSMENT NOTICE are as follows:Answers to the BAR: Taxation 1994-2006
Describe separately the (Arranged by Topics) In both cases the taxpayer must apply with the Court of
Taxp
procedures on the legal Tax Appeals for the Issuance of an Injunctive writ to enjoin the Bureau of
ayer'
remediesunder the Tax Internal Revenue from collecting the disputed tax during the pendency of the Tax Rem
2 s
Code available to an proceedings.NOTE: A 2004 Amendment - The decision of the division of CTA is Remedi edie 2000
4 aggrieved taxpayer bothat rem
in turn appeallable within fifteen (15) days to the CTA en banc. The decision of es s
edie
the administrative and the CTA en banc is directly appeallable to the Supreme Court on question of
s
judicial levels. (5%) law on certiorari.The employment by the Bureau of Internal Revenue of any of
the Administrative Remedies for the collection of the tax like distraint, levy,
etc. may be administratively appealed by the taxpayer to the Commissioner
whose decision is appealable to the Court of Tax Appeals under other matter
arising under the provisions of the National Internal Revenue Code.The judicial
appeals starts with the Court of Tax Appeals, and continues in the same
manner as shown above. Should the Bureau of Internal Revenue decide to
utilize its Judicial tax remedies for collecting the taxes by means of an ordinary
suit filed with the regular courts for the collection of a sum of money, the
taxpayer could oppose the same going up the ladder of judicial processes from
the Municipal Trial Court (as the case may be) to the Regional Trial Court, to
the Court of Appeals, thence to the Supreme Court. The remedies of an
aggrieved taxpayer on a claim for refund is to appeal the adverse decision of
the Commissioner to the CTA in the same manner outlined above.
 Limi
tati
ons
Give at least two (2) Two (2) fundamental principles governing real property taxation are: 1) The on
fundamental principles appraisal must be at the current and fair market value; and 2) Classification for Prini the
governing real property assessment must be on thebasis of actual use. (Sec. 198, Local Government Real ples taxi
taxation, which are Code) ALTERNATIVE ANSWER:The examinee should be given credit if Propert and ng
2
limitations on the taxing he chooses the above two (2) or any two (2) of those enumerated below: 1) y Limit pow 2000
5 power of local governments Assessment must be on the basis of uniform classification; 2) Appraisal, Taxatio ation erof
insofar as the levying of the assessment, levy and collection shall not be let to private persons; and 3) n of loca
realty tax is concerned. Appraisal and assessment must be equitable. (Sec. 198, Local Government LGUs l
(2%) Code) gov
ern
men
t
On the basis of a warrant
of seizure and detention
issued
by the Collector of Customs
Motion granted. The Court of Tax Appeals has jurisdiction only over decisions
for the purpose of
of the Commissioner of Customs in cases involving seizures, detention or
enforcing
release of property affected. (Sec. 7, R.A. No. 1125). There is no decision yet of
the Tariff and Customs
the Commissioner which is subject to review by the Court of Tax Appeals.
Laws, assorted brands of Juris Juris
cigarettes Judicial dicti dicti
2 ALTERNATIVE ANSWER:
said to have been illegally Remedi on on 2000
6 imported into the Motion granted. The Court of Tax Appeals has no jurisdiction because there is
es of of
no decision rendered by the Commissioner of Customs on the seizure and
Philippines CTA CTA
forfeiture case. The taxpayer should have appealed the decision rendered by
were seized from a store
the Collector within fifteen (15) days from receipt of the decision to the
where they were openly
Commissioner of Customs. The Commissioner’s adverse decision would then
offered for
be the subject of an appeal to the Court of Tax Appeals.
sale. Dissatisfied with the
decision rendered after
hearing by
the Collector of Customs on
 the confiscation of the
articles,
the importer filed a petition
for review with the Court of
Tax Appeals. The Collector
moved to dismiss the
petition
for lack of Jurisdiction. Rule
on the motion. (2%)

On the basis of a warrant

of seizure and detention
issued by the Collector of
Customs for the purpose of
enforcing the Tariff and
No. The legislators intended to divest the Regional Trial Courts of the
Customs Laws, assorted
jurisdiction to replevin a property which is a subject of seizure and forfeiture
brands of cigarettes said to
proceedings for violation of the Tariff and Customs Code otherwise, actions
have been illegally
for forfeiture of property for violation of the Customs laws could easily be
imported into the
undermined by the simple device of replevin. (De la Fuente v. De Veyra, et. al, Juris Juris
Philippines were seized
120 SCRA 455) Judicial dicti dicti
2 from a store where they
There should be no unnecessary hindrance on the government's drive to Remedi on on 2000
7 were openly offered for prevent smuggling and other frauds upon the Customs. Furthermore, the es of of
sale. Dissatisfied with the
Regional Trial Court do not have Jurisdiction in order to render effective and CTA CTA
decision rendered after
efficient the collection of Import and export duties due the State, which
hearing by the Collector of
enables the government to carry out the functions It has been Instituted to
Customs on the
perform. (Jao, et al, Court of Appeals, et al, and companion case, 249 SCRA 35,
confiscation of the articles,
43)
the importer filed a petition
for review with the Court of
Tax Appeals. The Collector
moved to dismiss the
petition
 for lack of Jurisdiction. b)
Under the same facts, could
the importer file an action
in the Regional Trial Court
for replevin on the ground
that the
articles are being
wrongfully detained by the
Collector of Customs since
the importation was not
illegal and therefore
exempt from seizure?
Explain. (3%)

No. Set-off is available only if both obligations are liquidated and demandable.
Liquidated debts are those where the exact amounts have already been determined. In
the instant case, the claim of the taxpayer for VAT refund is still pending and the amount Set-
Com
May a taxpayer who has has still to be determined. A fortiori, the liquidated obligation of the taxpayer to the Off
pending claims for VAT input government can not, therefore, be set-off against the unliquidated claim which the pens
Value- or
credit or refund, set-off said taxpayer conceived to exist in his favor. (Philex Mining Corp. v. CIR, GR No. 125704, ation
1 claims against his other tax August 29, 1998).ALTERNATIVE ANSWER:No. Taxes and claims for refund cannot be
Added com 2001
of
liabilities? Explain your answer. the subject of set-off for the simple reason that the government and thetaxpayer are not Tax pen
Taxe
(5%) creditors and debtors of each other. There is a material distinction between a tax and a sati
claim for refund. Claims for refunds just like debts are due from the government in its s
on
corporate capacity, while taxes are due tothe government in its sovereign capacity.
(Philex Mining Corp. v. CIR, GR No. 125704, August 29, 1998).

Tax amnesty is an immunity from all criminal, civil and administrative liabilities arising
from nonpayment of taxes. Tax
It is a general pardon given to all taxpayers. It applies only to past tax periods, hence of General Doct amn
retroactive application. Principl rine esty
Distinguish a tax amnesty from (People v. Costonedo, G.R. No. L-46881, 1988).
2 a tax exemption. (3%) Tax exemption is an immunity from the civil liability only. It is an immunity or privilege, a
es of in and 2001
freedom from a charge or Taxatio Taxa exe
burden to which others are subjected. (Florer v. Sheridan, 137 Ind. 28, 36 ME 365). It is n tion mpt
generally prospective in ion
application.
 General Colle
Yes. The collection of taxes may be barred by prescription.
May the collection of taxes be The prescriptive periods for collection of taxes are governed by the tax law imposing the Principl ction Pres
3 barred by prescription? tax. However, if the tax law es of of cript 2001
Explain your answer. (3%) does not provide for prescription, the right of the government to collect taxes becomes Taxatio Taxe ion
imprescriptible.
n s
Aut
Judic hori
As a general rule, the courts have no authority to enjoin the collection of revenue taxes. Jusicial ial ty of
May the courts enjoin the
(Sec. 218, NIRC). However, the Court of Tax Appeals is empowered to enjoin the
4 collection of revenue taxes?
collection of taxes through administrative remedies when collection could jeopardize the
Remedi Proc Ordi 2001
Explain your answer. (2%) es edur nary
interest of the government or taxpayer. (Section 11, RA 1125).
es Cou
rts
Taxa
A domestic corporation is required to file income tax returns four (4) times for income tion
earned during a single
How often does a domestic
taxable year. Quarterly returns are required to be filed for the first three quarters where of
corporation file income tax Income Tax
the corporation shall declare Dom
5 return for income earned
its quarterly summary of gross income and deductions on a cumulative basis. (Section
Taxatio Pay 2001
during a single taxable year? estic
75, NIRC). Then, a final n able
Explain the process. (3%)
adjustment return is required to be filed covering the total taxable income for the entire
Corp
year, calendar or fiscal. (Section 76, NIRC). orati
on
Taxa
tion
How often does a domestic The reason for this procedure is to ensure the timeliness of collection to meet the
corporation file income tax budgetary needs of the government. Likewise, it is designed to ease the burden on the of
Income Tax
return for income earned taxpayer by providing it with an installment paymentscheme, rather than requiring the Dom
6 during a single taxable year? payment of the tax on a lump-sum basis after the end of the year.ALTERNATIVE
Taxatio Pay 2001
estic
What is the reason for such ANSWER:The reason for the quarterly filing of tax returns is to allow partial collection of n able
procedure? (2%) the tax before the end of thetaxable year and also to improve the liquidity of government
Corp
orati
on
Taxpayers whose only income Allo Ded
No more. Gross compensation income earners are now allowed at least an item of
consists of salaries and wages
from their employers have long
deduction in the form of wabl ucti
premium payments on health and/or hospitalization insurance in an amount not Income
been complaining that they are e on
7 not allowed to deduct any item
exceeding P2,400 per annum Taxatio 2001
[Section 34(M)]. This deduction is allowed if the aggregate family income do not exceed Ded on
from their gross income for n
purposes of computing their
P250.000 and by the spouse, in case of married individual, who claims additional uctio Gro
personal exemption for dependents. ns ss
net taxable income.
 With the passage of the Inco
Comprehensive Tax Reform
Act of 1997, is this complaint
me
still valid? Explain your answer.
(5%)

Income subject to final tax refers to an income wherein the tax due is fully collected
Taxa
through the withholding tax tion
What is meant by income system. Under this procedure, the payor of the income withholds the tax and remits it to With of
subject to "final tax"? Give at the government as a final Income
holdi resi
8 least two examples of income settlement of the income tax due on said income. The recipient is no longer required to Taxatio 2001
of resident individuals that is include the item of ng den
n
subject to the final tax. (3%) income subjected to "final tax" as part of his gross income in his income tax returns. Tax t
Examples of income subject to citiz
final tax are dividend income, interest from bank deposits, royalties, etc.
en
EXCLUSIONS from gross income refer to a flow of wealth to the taxpayer which are not
treated as part of gross Excl
income, for purposes of computing the taxpayer’s taxable income, due to the following usio
reasons: (1) It is exempted by
the fundamental law; (2) It is exempted by statute; and (3) It does not come within the
n vs.
definition of income. (Section 61, Ded
Distinguish "Exclusion from RR No. 2). DEDUCTIONS from gross income, on the other hand, are the amounts, Gros ucti
Gross Income" from which the law allows to be Income
s on
9 "Deductions From Gross deducted from gross income in order to arrive at net income. Taxatio 2001
Income". Give an example of Exclusions pertain to the computation of gross income, while deductions pertain to the Inco fro
n
each. (2%) computation of net income. me m
Exclusions are something received or earned by the taxpayer which do not form part of Gro
gross income while deductions are something spent or paid in earning gross income.
Example of an exclusion from gross income is proceeds of life insurance received by the ss
beneficiary upon the death of the insured which is not an income or 13th month pay of Inco
an employee not exceeding P30.000 which is an income not recognized for tax me
purposes. Example of a deduction is business rental.
 The reason for imposing final withholding tax rather than the progressive tax schedule
on cash dividends received bya resident citizen or alien from a domestic corporation, is
to ensure the collection of income tax on said income. If wesubject the dividend to the
progressive tax rate, which can only be done through the filing of income tax returns, Wit
thereis no assurance that the taxpayer will declare the income, especially when there hhol
What do you think is the are other items of gross incomeearned during the year. It would be extremely difficult for
reason why cash dividends, the BIR to monitor compliance considering the hugenumber of stockholders. By shifting ding
when received by a resident the responsibility to remit the tax to the corporation, it is very easy to checkcompliance tax
citizen or alien from a domestic because there are fewer withholding agents compared to the number of income With
Income of
1 corporation, are taxed only at recipients.Likewise, the imposition of a final withholding tax will make the tax available to holdi
the final tax of 10% and not at the government at an earlier time.Finally, the final withholding tax will be a sure revenue
Taxatio Do 2001
0 ng
the progressive tax rate to the government unlike when the dividend is treated as areturnable income where the n mes
Tax
schedule under Section 24(A) recipient thereof who is in a tax loss position is given the chance to offset such tic
ofthe Tax Code? Explain your lossagainst dividend income thereby depriving the government of the tax on said Cor
answer. (5%) dividend income. [Note: It is recommended that any of the foregoing answers can be
given full credit because the question involves a policy issue which can only be found in pora
the deliberations of Congress.]ALTERNATIVE ANSWER:The reason why cash tion
dividends received by a resident citizen or alien from a domestic corporation are
subjectedto the final withholding tax of 10% and not at the progressive rate tax schedule
is to lessen the impact of asecond layer of tax on the same income.

A, a doctor by profession, sold

in the year 2000 a parcel of
land which he bought as a form
of investment in 1990 for Php 1
million. The land was sold to B,
his colleague, at a time when Nat
the real estate prices had gone ure
down and so the land was sold
No. The 6% capital gains tax on sale of a real property held as capital asset is imposed Capit
on the income presumed to have been realized from the sale which is the fair market Income of
1 only for Php 800,000 which al
was then the fair
value or selling price thereof, whichever is higher. (Section 24(D), NIRC). Actual gain is Taxatio Capi 2001
1 not required for the imposition of the tax but it is the gain by fiction of law which is gain
market value of the land. He n tal
taxable. tax
used the proceeds to finance Gain
his trip to the United States. He Tax
claims that he should not be
made to pay the 6% final tax
because he did not have any
actual gain on the sale. Is his
contention correct? Why? (5%)
 Cor
pora
The imposition of the Minimum Corporate Income Tax (MCIT) is designed to forestall te
the prevailing practice of Inco
corporations of over claiming deductions in order to reduce their income tax payments. me
The filing of income tax returns showing a tax loss every year goes against the business Corp
What is the rationale of the law
motive which impelled the stockholders to form the tax
in imposing what is known as Income orat
1 corporation. This is the reason why domestic corporations (and resident foreign on
the Minimum Corporate
corporations) after the recovery
Taxatio e 2001
2 Income tax on Domestic Do
period of four years from the time they commence business operations, they become n Inco
Corporations? (3%) mes
liable to the MCIT whenever this me
tax imposed at 2% of gross income exceeds the normal corporate income tax imposed tic
tax
on net income. (Sponsorship Speech, Chairman of Senate Ways and Means Cor
Committee). pora
tion
s

No. The minimum corporate income tax is a proxy for the normal corporate income tax, Cor
not the regular corporateincome tax paid by a corporation. For instance, a proprietary pora
educational institution may be subject to aregular corporate income tax of 10% te
(depending on its dominant income), but it is exempt from the imposition ofMCIT
because the latter is not intended to substitute special tax rates. So is with PEZA Inco
Is a corporation which is enterprises,CDA enterprises etc.[Note: If what is meant by regular income tax is the Corp me
exempted from the minimum 32% tax rate imposed on taxable income of corporations, theanswer would be in the Income orat tax
1 corporate income tax affirmative, because domestic corporations and resident foreign corporations are
automatically exempted from eitherliable for the 2% of gross income (MCIT) or 32% of net income (the normal
Taxatio e on 2001
3 n Inco Do
the regular corporate income corporate income tax) whichever ishigher.]ALTERNATIVE ANSWER:No. A corporation
tax? Explain your answer. (2%) which is exempted from the minimum corporate income tax is not automatically me mes
exempted from the regular corporate income tax. The reason for this is that MCIT is tax ticC
imposed only beginning on the fourth taxable yearimmediately following the year in
which such corporation commenced its business operations. Thus, a corporation may orp
be exempt from MCIT because it is only on its third year of operations following its orat
commencement of businessoperations. ions
 The distinction between allowable deductions and personal Allo
exemptions are as follows: wab
a. As to amount — Allowable deductions generally refer to actual expenses incurred in
the pursuit
le
of trade, business or practice of profession while Answers to the BAR: Taxation 1994- Allo ded
Distinguish Allowable
Deductions from Personal
2006 (Arranged by Topics) wabl ucti
personal exemptions are arbitrary amounts allowed by law. Income
1 Exemptions. Give an example e on
As to nature — Allowable deductions constitute business expenses while personal Taxatio 2001
4 of an allowable deduction and Ded qnd
exemptions pertain to personal n
another example for personal
exemption. (5%)
expenses. uctio pers
As to purpose — Deductions are allowed to enable the taxpayer to recoup his cost of ns onal
doing business while personal exemptions are allowed to cover personal, family and
living expenses. exw
As to claimants — Allowable deductions can be claimed by all taxpayers, corporate or mpt
otherwise, while personal exemptions can be claimed only by individual taxpayers. ion
X was hired by Y to watch over
V’s fishponds with a salary of
Php 10,000.00. To enable him
to perform his duties well, he
Cov
was also provided a small hut, erag
No. X is neither a managerial nor a supervisory employee. Only managerial or Fring
which he could use as his
supervisory employees are entitled to a e of
residence in the middle of the Income e
1 fringe benefit subject to the fringe benefits tax. Even assuming that he is a managerial Frin
fishponds. Is the fair market
or supervisory employee,
Taxatio Bene 2001
5 value of the use of the small ge
the small hut is provided for the convenience of the employer, hence does not constitute n fit
hut by X a "fringe benefit" that ben
is subject to the 32% tax
a taxable fringe benefit. (Section 33, NERC). Tax
efit
imposed by Section 33 of the
National Internal Revenue tax
Code? Explain your answer.
(5%)
In order to facilitate the
processing of its application for
a license from a government
Ded
office, Corporation A found it Since the amount of Phpl00.000 constitutes a bribe, it is notallowed as a deduction from ucti
necessary to pay the amount of gross income of Corporation A,(Section 34(A)(l)(c), NIRC). However, to the recipient Gros on
Php 100,000 as a bribe to the government official, the same constitutes a taxable income. All income from legal or Income
1 s on
approving official. Is the Php illegal sources are taxable absent any clear provision of law exempting the same. This is Taxatio 2001
6 100,000 deductible from the the reason why gross income had been defined to include income from whatever source Inco Gro
n
gross income of Corporation derived.(Section 32(A), NIRC). Illegally acquired income constitutes realized income me ss
A? On the other hand, is the under the claim of right doctrine (Rutkinv. US, 343 US 130). Inco
Php 100,000 taxable income of
the approving official? Explain me
your answers. (5%)
 Yes. An individual deriving compensation concurrently from two or more employers at
any time during the taxable
year shall file an income tax return (Sec. 51(A)(2)(b), NIRC.)
In the year 2000, X worked part
time as a waitress in a
ALTERNATIVE ANSWER: Sour
restaurant in Mega Mall from
It depends. An individual with pure compensation income is not required to file an
8:00 a.m. to 4:00 p.m. and then
income tax returns when she meets ces
as a cashier in a 24-hour
the following conditions; (1) the total gross compensation income does not exceed of
convenience store in her
Php60,000.00 and Income Inco inco
1 neighborhood. The total
(2) the income tax has been correctly withheld, meaning the tax withheld is equal to the
income of X for the year from
tax due. (Section 5 l(A](2)(b), NIRC).
Taxatio me me 2001
7 the two employers does not n Tax subj
There is no mention in the problem of the amount of personal and additional personal
exceed her total personal and
additional exemptions for the
exemption to quantify how ect
much is that compensation income that did not exceed the personal and additional to
year 2000. Was she required to
personal exemptions. There is no,
file an income tax return last tax
mention, either, of whether or not the employers withheld taxes and that the amount
April? Explain your answer.
withheld is equal to the tax due.
(5%)
Whether or not she will be required to file an income tax return last April 15 on the 2000
income will depend on her
compliance with the requirements of the law.

Wit
hhol
Is a non-resident alien who is
not engaged in trade or
ding
business or in the exercise of No. The income tax on all income derived from Philippine sources by a non-resident tax
profession in the Philippines alien who is not engaged in trade With of
but who derived rental income or business in the Philippines is withheld by the lessee as a Final Withholding Tax. Income
1 holdi non
from the Philippines required to (Section 57(A), NIRC). The government can not require persons outside of its territorial Taxatio 2001
8 file an income tax return on jurisdiction to file a return; for this reason, the income tax on income derived from within ng -
n
April of the year following his must be collected through the withholding tax system and thus relieve the recipient of Tax resi
receipt of said income? If not, the income the duty to file income tax returns. (Section 51, NIRC). den
why not?
Explain your answer. (5%) t
alie
n
 A, aged 90 years and suffering
from incurable cancer, on
August 1, 2001 wrote a will
Yes. When the donor makes his will within a short time of, or simultaneously with, the Inclu Don
and, on the same day, made
making of gifts, the gifts are sion atio
several inter-vivos gifts to his
considered as having been made in contemplation of death. (Roces v. Posadas, 58 Phil. on n
1 children. Ten days later, he Estate
108). Obviously, the intention of the donor in making the inter-vivos gifts is to avoid the
died. In your opinion, are the
imposition of the estate tax and since the donees are likewise his forced heirs who are
gros mor 2001
9 inter-vivos gifts considered Tax
called upon to inherit, it will create a presumption juris tantum that said donations s tis
transfers in contemplation of
death for purposes of
were made mortis causa, hence, the properties donated shall be included as part of A's estat caus
gross estate. e a
determining properties to be
included in his gross estate?
Explain your answer. (5%)
On the first anniversary of the
death of Y, his heirs hosted a Allo
sumptuous dinner for his wab
doctors, nurses, and others
who attended to Y during his le
No. This expense will not fall under any of the allowable deductions from gross estate.
last illness. The cost of the ded
dinner amounted to Php
Whether viewed in thecontext of either funeral expenses or medical expenses, the same Gros
will not qualify as a deduction. Funeral expenses may include medical expenses of the ucti
2 50,000.00. Compared to his Estate s
gross estate, the Php
last illness but not expenses incurred after burial nor expenses incurred to on 2001
0 commemorate the death anniversary. (De Guzman V. De Guzman, 83 SCRA 256). Tax Estat
50,000.00 did not exceed five on
Medical expenses, on the otherhand, are allowed only if incurred by the decedent within e
percent of the estate. Is the
one year prior to his death. (Section 86(A)(6), NIRC). gros
said cost of the dinner to s
commemorate his one year
death anniversary deductible esta
from his gross estate? Explain te
your answer. (5%)
Your bachelor client, a Filipino
residing in Quezon City, wants
to give his sister a gift of Php
I would advice him to split the donation. Giving the Php200,000 as a one-time donation
200,000.00. He seeks your
would mean that it will Don
advice, for purposes of
be subject to a higher tax bracket under the graduated tax structure thereby
reducing if not eliminating the
necessitating the payment of donor's tax. On the other hand, splitting the donation into atti
2 donor's tax on the gift, on Donor's Don on
two equal amounts of Php 100,000 given on two different years will
whether it is better for him to
totally relieve the donor from the donor’s tax because the first Phpl00.000 donation in
2001
1 give all of the Php 200,000.00 Tax ation to a
the graduated brackets is
on Christmas 2001 or to give
exempt. (Section 99, NIRC). While the donor’s tax is computed on the cumulative
sibli
Php 100,000.00 on ng
donations, the aggregation of all donations made by a donor is allowed only over one
Christmas2001 and the other
calendar year.
Php 100,000.00 on January 1,
2002. Please explain your
advice. (5%)
 Flexi Flexi
What do you understand by the
The term "flexible tariff clause "refers to the authority given to the President to adjust Tariff ble ble
2 term "flexible tariff clause" as tariff rates under+C128 Section 401 of the Tariff and Customs Code, which is the and Tarif Tarif
enabling law that made effective the delegation of the taxing power to the President 2001
2 used in the Tariff and Customs under the Constitution. [Note: It is suggested that if the examinee cites the entire Custom f f
Code? (5%)
provision of Sec. 401 of the Tariff &, Customs Code, he should also be given full credit.] Duties Clau Clau
se se
Congress, after much public
hearing and consultations with
various sectors of society,
came to the conclusion that it
will be good for the country to Limi
have only one system of No. The law centralizing the imposition and collection of all taxes in the national tati
taxation by centralizing the government would contravene the General
imposition and collection of all Constitution which mandates that: . . . "Each local government unit shall have the power Pow ons
Principl
2 taxes in the national to create their own sources of revenue and to levy taxes, fees, and charges subject to er of of
government. such guidelines and limitations as Congress may provide consistent with the basic
es of 2001
3 Taxa the
Accordingly, it is thinking of policy of local autonomy." It is clear that Congress can only give the guidelines and Taxatio
tion Con
passing a law that would limitations on the exercise by the local governments of the power to tax but what was n
abolish the taxing power of all granted by the fundamental lawcannot be withdrawn by Congress. gres
local government units. In your s
opinion, would such a law be
valid under the present
Constitution? Explain your
answer. (5%)
Under Article 415 of the Civil
Code, in order for machinery
and equipment to be
considered real property, the
pieces must be placed by the Real
Real
owner of the land and, in
Yes. The properties are considered as necessary fixtures of the gasoline station, without Pro
addition, must tend to directly Prop
which the gasoline station would be useless. Machinery and equipment installed by the pert
meet the needs of the industry
lessee of leased land is not real property for purposes of execution of a final judgment erty
or works carried on by the Real y
2 only. They are considered as real property for real property tax purposes as "other taxat
owner. Oil companies install
improvements to affixed or attached real property under the Assessment Law and the
Propert taxa 2001
4 underground tanks in the ion
Real Property Tax Code. y Tax tion
gasoline stations located on unde
land leased by the oil
(Caltex v. Central Board of Assessment Appeals, 114 SCRA und
296 [1982]). r
companies from the owners of er
the land where the gasoline LGC
LGC
stations [are] located. Are
those underground tanks,
which were not placed there by
the owner of the land but which
 were instead placed there by
the lessee of the land,
considered real property for
purposes
of real property taxation under
the local Government Code?
Explain. (8%)

Mr. Sebastian is a Filipino

seaman employed by a
Norwegian company which is
engaged exclusively
ininternational shipping. He
and his wife, who manages
their business, filed a joint
income tax return for 1997 on The income of Mr. Sebastian as a seaman is considered as income of a non-resident
March 15, 1998. After an audit citizen derived from withoutthe Philippines. The total gross income, in US dollars (or if in Inco
of the return, the BIR issued on other foreign currency, its dollar equivalent) fromwithout shall be declared by him for me
April 20, 2001 a deficiency income tax purposes using a separate income tax return which will not includehis of a
income tax assessment for the income from business derived within (to be covered by another return). He is entitled to
sum of P250.000.00, inclusive deduct from his dollargross income a personal exemption of $4,500 and foreign national non
Income
of interest and penalty. For income taxes paid to arrive at his adjusted incomeduring the year. His adjusted income Inco -
1 failure of Mr. and Mrs. will be subject to the graduated tax rates of 1% to 3%. (Sec. 21 (b), Tax Code
Taxatio 2002
me resi
Sebastian to pay the tax within of1986[PD 1158], as amended by PD 1994).[Note: The bar candidates are not expected n
the period stated in the notice to be familiar with tax history. Considering that this is already the fourth year of
den
of assessment, the BIR issued implementation of the Tax Code of 1997, bar candidates were taught and prepared to t
on August 19, 2001 warrants of answer questions based on the present law. It is therefore requested that the examiner alie
distraint and levy to enforce be more lenient in checking the answers to this question. Perhaps, an answer based on n
collection of the tax.A. What is the present law be given full credit.]
the rule of income taxation with
respect to Mr. Sebastian's
income in 1997 as a seaman
on board the Norwegian vessel
engaged in international
shipping? Explain your answer.
(2%)
 Mr. Sebastian is a Filipino
seaman employed by a
Norwegian company which is
engaged exclusively in
international shipping. He and
his wife, who manages their
business, filed a joint income
tax return for 1997 on March
15, 1998. After an audit of the
return, the BIR issued on April
20, 2001 a deficiency income
tax assessment for the sum of Taxp
I will raise the defense of prescription. The right of the BIR to assess prescribes after
P250.000.00, inclusive of
interest and penalty. For failure
three years counted from the ayer'
last day prescribed by law for the filing of the income tax returns when the said return is Tax Pres
of Mr. and Mrs. Sebastian to s
2 pay the tax within the period
filed on time. (Section 203, Remedi cript 2002
NIRC). The last day for filing the 1997 income tax return is April 15, 1998. Since the Rem
stated in the notice of es ion
assessment, the BIR issued on
assessment was issued only on edie
April 20, 2001, the BIR's right to assess has already prescribed. s
August 19, 2001 warrants of
distraint and levy to enforce
collection of the tax.If you are
the lawyer of Mr. and Mrs.
Sebastian, what possible
defense or defenses will you
raise in behalf of your clients
against the action of the BIR in
enforcing collection of the tax
by the summary remedies of
warrants of distraints and levy?
Explain your answer. (3%)
Mr. Castro inherited from his
father, who died on June 10,
1994, several pieces of real
property in Metro Manila. The
estate tax return was filed and
the estate tax due in the The protest should be resolved against Mr. Castro. What was filed is a fraudulent return
amount of P250.000.00 was making the prescriptive Asse Pres
Estate
3 paid on December 06, 1994. period for assessment ten (10) years from discovery of the fraud (Section 222, NIRC). ssme cript 2002
The Tax Fraud Division of the Accordingly, the assessment was issued within that prescriptive period to make an Tax
nt ion
BIR investigated the case on assessment based on a fraudulent return.
the basis of confidential
information given by Mr.
Santos
on January 06, 1998 that the
return filed by Mr. Castro was
 fraudulent and that he failed to
declare all properties left by
his father with intent to evade
payment of the correct tax. As
a result, a deficiency estate tax
assessment for P1,250,000.00,
inclusive of 50% surcharge for
fraud, interest and penalty, was
issued against him on January
10, 2001. Mr. Castro protested
the assessment on the ground
of prescription. Decide Mr.
Castro's protest. (2%)

Mr. Castro inherited from his

father, who died on June
10,1994, several pieces of real
property in Metro Manila.
Theestate tax return was filed
and the estate tax due in
theamount of P250.000.00 was
paid on December 06,
1994.The Tax Fraud Division of
the BIR investigated the case
onthe basis of confidential
information given by Mr. The legal requirements that must be complied by Mr. Santos to entitle him to reward are
Santoson January 06, 1998 as follows: 1) He shouldvoluntarily file a confidential information under oath with the Law
that the return filed by Mr. Division of the Bureau of Internal Revenue alleging therein the specific violations
Castro wasfraudulent and that constituting fraud; 2) The information must not yet be in the possession of the Bureau of Asse Pres
Estate
4 he failed to declare all Internal Revenue, or refer to a case already pending or previously investigated by the ssme cript 2002
properties left by his father with Bureau of Internal Revenue; 3) Mr. Santos should not be a government employee or a Tax
nt ion
intent to evade payment of the relative of a government employee within the sixth degree of consanguinity; and 4) The
correct tax. As a result, a information must result to collections of revenues and/or fines and penalties. (Sec.
deficiency estate tax 282,NIRC)
assessment for P1,250,000.00,
inclusive of 50% surcharge for
fraud, interest and penalty, was
issued against him on January
10, 2001. Mr. Castro protested
the assessment on the ground
of prescription. What legal
requirement/s must Mr.
Santoscomply with so that he
can claim his reward? Explain.
(3%)
 The MKB-Phils. is a BOI-
registered domestic
corporation
licensed by the MKB of the
United Kingdom to distribute,
support and use in the
Philippines its computer
software
systems, including basic and
related materials for banks.
The MKB-Phils. provides
consultancy and technical
Yes. The income of MKB-Phils. under the licensing agreement with banks shall be
services
considered as royalty subject
incidental thereto by entering
to the 20% final withholding tax. The term royalty is broad enough to include technical
into licensing agreements with
advice, assistance or services With
banks. Under such Income
rendered in connection with technical management or administration of any scientific, holdi Roy
5 agreements, the MKB-Phils.
industrial or commercial
Taxatio 2002
will not ng alty
undertaking, venture, project or scheme. (Sec. 42(4)(f), NIRC). Accordingly, the n
acquire any proprietary rights
consultancy and technical services
Tax
in the licensed systems. The
rendered by MKB-Phils, which are incidental to the distribution, support and use of the
MKB-Phils. pays royalty to the
computer systems of MKB-UK are taxable as royalty.
MKB-UK, net of 15%
withholding tax prescribed by
the RP-UK Tax Treaty.
Is the income of the MKB-Phils.
under the licensing
agreement with banks
considered royalty subject to
20%
final withholding tax? Why? If
not, what kind of tax will its
income be subject to? Explain.
(5%)
 TY Corporation filed its final
adjusted income tax return
for1993 on April 12, 1994
showing a net loss from
operations.After investigation,
the BIR issued a pre-
assessment noticeon March
30, 1996. A final notice and
demand letter datedApril 15,
1997 was issued, personally
delivered to andreceived by the
company's chief accountant.
For willfulrefusal and failure of
The motion to dismiss should not be granted. It is only when the assessment has
TY Corporation to pay the
become final and unappealablethat the 5-year period to file a criminal action
tax,warrants of distraint and Pres Pres
commen+C135ces to run (Tupaz v. Ulop, 316 SCRA 118 [1999]). Thepre-assessment
levy on its properties were Judicial cripti cript
notice issued on March 30, 1996 is not a final assessment which is enforceable by the
issuedand served upon it. On
6 January 10, 2002, a criminal
BIR. It is theissuance of the final notice and demand letter dated April 15, 1997 and the Remedi ve ive 2002
failure of the taxpayer to protest within 30 days from receipt thereof that made the es Peri Peri
chargefor violation of the Tax
assessment final and unappealable. The earliest date that the assessment has become
Code was instituted in the
final is May 16, 1997 and since the criminal charge was instituted on January 10, 2002, od od
RegionalTrial Court with the
the same was timely filed.
approval of the
Commissioner.The company
moved to dismiss the criminal
complaint onthe ground that an
act for violation of any
provision of theTax Code
prescribes after five (5) years
and, in this case,the period
commenced to run on March
30, 1996 when thepre-
assessment was issued. How
will you resolve themotion?
Explain your answer. (5%)
 The taxpayer must comply with the following procedures in claiming a refund of, or tax
credit for, taxes and penalties
which he alleges to have been erroneously, illegally or excessively assessed or
collected:
What must a taxpayer do in Taxp
2. He should file a written claim for refund with the Commissioner within two years after
order to claim a refund of,
or tax credit for, taxes and
the date of payment of the tax or penalty (Sec. 204, NIRC); ayer'
Tax
penalties which he alleges to s Refu
7 have been erroneously,
1 The claim filed must state a categorical demand for reimbursement (Bermejo v. Remedi 2002
Collector, 87 Phil. 96 [1950]). Rem nd
illegally or excessively es
assessed or
2 The suit or proceeding for recovery must be commenced in court within two years edie
from date of payment of the tax or penalty regardless of any supervening event that will s
collected? (3%)
arise after payment (Sec. 229, NIRC).
[Note: If the answer given is only number 1, it is suggested that the same shall be given
full credit considering that this is the only requirement for the Commissioner to acquire
jurisdiction over the claim.]
Yes. When the taxpayer files a return which on its face shows an overpayment of the tax
and the option to refund/
claim a tax credit was chosen by the taxpayer, the Commissioner shall grant the refund Adm
Can the Commissioner grant a or tax credit without the need for a written claim. This is so, because a return filed Tax inistr
refund or tax credit even showing an overpayment shall be considered as a written claim for credit or refund. Refu
8 without a written claim for it? (Sees. 76 and 204, NIRC).
Remedi ative 2002
nd
(2%) Moreover, the law provides that the Commissioner may, even without a written claim es Rem
therefor, refund or credit any tax where on the face of the return upon which payment edy
was made, such payment appears clearly to have been erroneously paid. (Sec. 229,
NIRC)
 XYZ Foundation is a non-stock,
non-profit association
dulyorganized for religious,
charitable and social
welfarepurposes. Last January
3, 2000 it sold a portion of its
lotused for religious purposes
and utilized the entire
proceedsfor the construction of
a building to house its free Day
andNight Care Center for
children of single parents. In
order tosubsidize the expenses
of the Day and Night Care
Centerand to support its
religious, charitable and social
welfareprojects, the Foundation
leased the 300square meter
area of the second and third The exemption contemplated in the Constitution covers real estate tax on real properties
floors of the building for use as actually, directly andexclusively used for religious, charitable or social welfare purposes.
General Doct
aboarding house. The It does not cover exemption from the impositionof the income tax which is within the Tax
Foundation also operates a context of Section 30 of the Tax Code. As a rule, non-stock nonprofitcorporations Principl rine
Exe
9 canteenand a gift shop within organized for religious, charitable or social welfare purposes are exempt from income es of in 2002
the premises, all the income tax on theirincome received by them as such. However, if these religious, charitable or mpt
Taxatio Taxa
fromwhich is used actually, social welfare corporations deriveincome from their properties or any of their activities ion
directly, and exclusively for conducted for profit, the income tax shall be imposed onsaid items of income n tion
thepurposes for which the irrespective of their disposition. (Sec. 30, NIRC; CIR v, YMCA, GR No. 124043, 1998).
Foundation was organized.A.
Considering the constitutional
provision grantingtax
exemption to non-stock
corporations such as
thoseformed exclusively for
religious, charitable or social
welfarepurposes, explain the
meaning of the last paragraph
of saidSec. 30 of the 1997 Tax
Code which states that
“Income ofwhatever kind and
character of the foregoing
organizations from any of their
properties, real or personal, or
from any of their activities
conducted for profit regardless
of the disposition made of such
income shall be subject to tax
imposed under this Code."
(5%)
 XYZ Foundation is a non-stock,
non-profit association duly
organized for religious,
charitable and social welfare
purposes. Last January 3,
2000 it sold a portion of its lot
used for religious purposes and
utilized the entire proceeds
for the construction of a
building to house its free Day
and
Night Care Center for children
of single parents. In order to
subsidize the expenses of the
Day and Night Care Center
and to support its religious, Yes. The income derived from the sale of lot and rentals from its boarding house are
General Doct
charitable and social welfare considered as income Tax
projects, the Foundation leased from properties which are subject to tax. Likewise, the income from the operation of the Principl rine
1 Exe
the 300square meter area of canteen and gift shop es of in 2002
0 the second and third floors of are income from its activities conducted for profit which are subject to tax. The income mpt
Taxatio Taxa
the building for use as a tax attaches irrespective of the disposition of these incomes. (Sec. 30, NIRC; CIR v. ion
boarding house. The YMCA, GR No. 124043, 1998). n tion
Foundation also operates a
canteen
and a gift shop within the
premises, all the income from
which is used actually, directly,
and exclusively for the
purposes for which the
Foundation was organized.Is
the income derived by XYZ
Foundation from the sale of a
portion of its lot, rentals from its
boarding house and the
operation of its canteen and gift
shop subject to tax? Explain.
(5%)
Taxp Pri
There is prima facie evidence of a false or fraudulent return when the taxpayer has
willfully and knowingly filed it withthe intent to evade a part or all of the tax legally due ayer' ma
Tax
1 What constitutes prima facie from him (Ungab v. Cusi,, 97 SCRA 877). There must appear adesign to mislead or s faci
evidence of a false orfraudulent
deceive on the part of the taxpayer, or at least culpable negligence. A mistake not
Remedi 2002
1 return? [2%] Rem e
culpable inrespect of its value would not constitute a false return. (Words and Phrases, es
Vol. 16, page 173).
edie evid
s enc
 e of
Frau
dule
nt
Ret
urn
(2002) On December 06, 2001,
LVN Corporation donated a
piece
of vacant lot situated in
Mandaluyong City to an
accredited Ded
and duly registered non-stock, Ded
A. No. Donations and/or contributions made to qualified donee institutions consisting of ucti
non-profit educational
property uctio
institution to be used by the Real on
1 other than money shall be based on the acquisition cost of the property. The donor is n on
latter in building a sports
not entitled to claim
Propert on 2002
2 complex for students. Inco
as full deduction the fair market value/zonal value of the lot donated. (Sec. 34(H), y Tax Inco
A. May the donor claim in full me
as deduction from its
NIRC). me
Tax
gross income for the taxable Tax
year 2001 the amount of the
donated lot equivalent to its fair
market value/zonal value at the
time of the donation? Explain
your answer. (2%)
Exe
Exe
mpt
mpti
In order that donations to non- ion
stock, non-profit
In order that donations to non-stock, non-profit educational institution may be exempt on
from the donor's Real fro
1 educational institution may be from
exempt from the donor's gift
gift tax, it is required that not more than 30% of the said gifts shall be used by the Propert m 2002
3 donee-institution for dono
tax, what conditions must be y Tax don
administration purposes. (Sec. 101(A)(3), NIRC). r's
met by the donee? (3%) or's
gift
gift
tax
tax
 The following real property taxes aside from the basic real property tax may be imposed
by provincial and city
governments as well as by municipalities in the Metro Manila area:
1 Additional levy on real property for the Special Education Fund (Sec. 235, LGC);
2 Additional Ad-valorem tax on Idle lands (Sec. 23§, LGC); and
3 Special levy (Sec. 240).
[Note: The question is susceptible to dual interpretation because it is asking for three
other taxes and not three other
real property taxes. Accordingly, an alternative answer should be considered and given
full credit]
Aside from the basic real A. The following taxes, aside from basic real estate tax, may be imposed by: Real
Local Real
estate tax, give three (3) other 1. Provincial Government Printer's or publisher's tax Franchise Tax Professional tax Pro
taxes which may be imposed 2. City Government - may levy taxes which the province or municipality are authorized Govern Prop
1 pert
by provincial and city to levy (Sec. 151, LGC) ment erty 2002
4 governments as well as by Printer's or publisher's tax Franchise tax Professional tax Answers to the BAR: Taxation y
Taxatio Taxe
municipalities in the Metro 1994-2006 (Arranged by Topics) Tax
Manila area. (3%) 3. Municipalities in the Metro Manila Area - may levy taxes at rates which shall not n s
es
exceed by 50% the maximum
rates prescribed in the Local Government Code.
Annual fixed tax on manufacturers, assemblers, repackers, processors, brewers,
distillers, rectifiers and
compounders of liquors, distilled spirits, and wines or manufacture of any article of
commerce of whatever kind or nature;
Annual fixed tax on wholesalers, distributors, or dealers in any article of commerce of
whatever kind or nature;
Percentage tax on retailers [Note: Other taxes may comprise the enumeration because
many other taxes are authorized to be imposed by LGUs.
An Ordinance was passed by
the Provincial Board of
aProvince in the North, Imp
increasing the rate of basic The protest is devoid of merit. No public hearing is required before the enactment of a
realproperty tax from 0.006% local tax ordinancelevying the basic real property tax (Art. 324,
ositi
to 1 % of the assessed value LGCRegulations).ALTERNATIVE ANSWER:Yes, there is merit in the protest provided on
Local Real
ofthe real property effective that sufficient proof could be introduced for the non-observance of publichearing. By of
January 1, 2000. Residents of implication, the Supreme Court recognized that public hearings are required to be Govern Prop
1 Real
themunicipalities of the said conducted prior to theenactment of an ordinance imposing real property taxes. Although ment erty 2002
5 province protested the it was concluded by the highest tribunal thatpresumption of validity of a tax ordinance Pro
Taxatio Taxe
Ordinanceon the ground that can not be overcome by bare assertions of procedural defects on its enactment, it would pert
no public hearing was seem that if the taxpayer had presented evidence to support the allegation that no public n s
y
conducted and,therefore, any hearing was conducted, the Court should have ruled that the tax ordinance is invalid.
increase in the rate of real (Belen Figuerres v. Court ofAppeals, GRNo. 119172, March 25, 1999). Tax
property tax isvoid. Is there es
merit in the protest? Explain
your answer.(2%)
 The following properties are exempt from real property taxes: (Sec. 234, LGC).
1 Real property owned by the Republic of the Philippines or any of its political Exe
subdivisions except when the beneficial use thereof has been granted, for consideration mpt
or otherwise, to a taxable person;
2 All lands, buildings and improvements actually, directly, and exclusively used for ion
religious, charitable or educational purposes by charitable institutions, churches, Local Real fro
Under the Local Government parsonages or convents appurtenant thereto, mosques, nonprofit or religious Govern Prop m
1 Code, what properties are cemeteries;
exempt from real property 3 All machineries and equipment that are actually, directly and exclusively used by local
ment erty real 2002
6 Taxatio Taxe pro
taxes? (5%) water districts and
government-owned or controlled corporations engaged in the supply and distribution of n s pert
water and/or generation and y
transmission of electric power;
4 All real property owned by duly registered cooperatives as provided for under R.A. No. taxe
6938; and s
5 Machinery and equipment used for pollution control and environmental protection.
The real property of Mr. and
Mrs Angeles, situated in a
commercial area in front of the
public market, was declared
in their Tax Declaration as
residential because it had been
used by them as their family
residence from the time of its
construction in 1990. However,
since January 1997, when
the spouses left for the United
Actu
States to stay there al
The appeal should be decided against Mr. and Mrs. Angeles. The law focuses on the Local Real
permanently with their children,
actual use of the property for use
the property has been Govern Prop
1 classification, valuation and assessment purposes regardless of ownership. Section 217 of
rented to a single proprietor
of the Local Government Code provides that "real property shall be classified, valued,
ment erty 2002
7 engaged in the sale of real
and assessed on the basis of its actual use regardless of where located, whoever owns Taxatio Taxe
appliances and agri-products. pro
The Provincial Assessor
it, and whoever uses it". n s
pert
reclassified the property as
commercial for tax purposes y
starting January 1998. Mr. and
Mrs. Angeles appealed to the
Local Board of Assessment
Appeals, contending that the
Tax Declaration previously
classifying their property as
residential is binding. How
should the appeal be decided?
(5%)
 Gov
ern
Whenever the decision of the Automatic review is intended to protect the interest of the Government in the collection men
Collector of Customs isadverse of taxes and customs duties inseizure and protest cases. Without such automatic t in
to the government, it is review, neither the Commissioner of Customs nor the Secretary ofFinance would know the
automatically elevated tothe about the decision laid down by the Collector favoring the taxpayer. The power to decide Auto
Commissioner for review and, seizure and protest cases may be abused if no checks are instituted.Automatic review is coll
Tax mati
1 if it is affirmed by him, itis necessary because nobody is expected to appeal the decision of the Collector which is ecti
automatically elevated to the favorable to the taxpayer and adverse to the Government. This is the reason why
Remedi c 2002
8 on
Secretary of Finance forreview. whenever the decision of the Collector isadverse to the Government, the said decision is es Revi
of
What is the basis of the automatically elevated to the Commissioner for review; and if such decision is affirmed ew
automatic review procedure in by the Commissioner, the same shall be automatically elevated to and be finally taxe
the Bureau of Customs? reviewed by the Secretary of Finance (Yaokasin v. Commissioner of Customs, 180 s
Explain your answer. (5%) SCRA 591 [1989]). and
cust
oms
On March 15, 2000, the BIR
issued a deficiency income tax
assessment for the taxable
year 1997 against the Valera
Group of Companies (Valera)
in the amount of P10 million.
Counsel for Valera protested
the assessment and requested
a reinvestigation of the case.
During the investigation, it was
shown that Valera had been Dist
transferring its properties to Yes, because there is no prohibition for this procedure considering that the filing of a Distr
Tax rain
1 other persons. As no additional civil action for collection aint
evidence to dispute the during the pendency of an administrative protest constitutes the final decision of the
Remedi t 2002
9 and
assessment had been Commissioner on the protest (CIR v. Union Shipping Corp., 85 SCRA 548 [1990]) es and
Levy
presented, the BIR issued on Levy
June 16,
2000 warrants of distraint and
levy on the properties and
ordered the filing of an action in
the Regional Trial Court
for the collection of the tax.
Counsel for Valera filed an
injunctive suit in the Regional
Trial Court to compel the
BIR to hold the collection of the
 tax in abeyance until the
decision on the protest was
rendered.
A. Can the BIR file the civil
action for collection,
pending decision on the
administrative protest? Explain.
(3%)

On March 15, 2000, the BIR

issued a deficiency income
taxassessment for the taxable
year 1997 against the
ValeraGroup of Companies
(Valera) in the amount of P10
million.Counsel for Valera
protested the assessment and
requested a reinvestigation of
the case. During the
investigation, it was shown that I will wait for the filing of the civil action for collection and consider the same as an Juris Juris
Valera had been transferring its appealable decision. I will notfile an injunctive suit because it is not an available remedy. Tax dicti dicti
2 properties to other persons. As I would then appeal the case to the Court of Tax Appeals and move for the dismissal of
no additional evidence to the collection case with the RTC.Once the appeal to the CTA is filed on time, the CTA
Remedi on on 2002
0 es of of
dispute theassessment had has exclusive jurisdiction over the case. Hence, the collectioncase in the RTC should be
been presented, the BIR dismissed (Tabes v. Flojo, 115 SCRA 278 [1982]). CTA CTA
issued on June 16,2000
warrants of distraint and levy
on the properties andordered
the filing of an action in the
Regional Trial Courtfor the
collection of the tax. Counsel
for Valera filed aninjunctive suit
in the Regional Trial Court to
compel theBIR to hold the
collection of the tax in
 abeyance until thedecision on
the protest was rendered.As
counsel for Valera, what action
would you takein order to
protect the interest of your
client? Explain youranswer.
(2%)

The Collector of Customs of

the Port of Cebu issued
warrants of seizure and
detention against the
importation of machineries and
equipment by LLD Import and
Export Co.
(LLD) for alleged nonpayment Viol
of tax and customs duties in No, because there is no decision as yet by the Commissioner of Customs which can be
violation of customs laws. LLD appealed to the atio
was notified of the seizure, CTA. Neither the remedy of prohibition would lie because the CTA has not acquired any Juris n of
but, before it could be heard, appellate jurisdiction over the Tax dicti tax
2 the Collector of Customs seizure case. The writ of prohibition being merely ancillary to the appellate jurisdiction,
issued a notice of sale of the the CTA has no jurisdiction over it until it has acquired jurisdiction on the petition for
Remedi on and 2002
1 es of cust
articles. In order to restrain the review.
Collector from carrying out the Since there is no appealable decision, the CTA has no jurisdiction over the petition for CTA om
order to sell, LLD filed with review and writ of prohibition. (Commissioner of Customs v. Alikpala, 36 SCRA 208 duti
the Court of Tax Appeals a [1970]).
petition for review with es
application for the issuance of
a writ of prohibition. It also
filed with the CTA an appeal for
refund of overpaid taxes
on its other importations of raw
materials which has been
pending with the Collector of
 Customs. The Bureau of
Customs moved to dismiss the
case for lack of jurisdiction of
the Court of Tax Appeals.
A. Does the Court of Tax
Appeals have jurisdiction
over the petition for review and
writ of prohibition?
Explain (3%)

The Collector of Customs of

the Port of Cebu
issuedwarrants of seizure and
detention against the
importation of machineries and
equipment by LLD Import and
Export Co.(LLD) for alleged Viol
nonpayment of tax and
customs duties inviolation of atio
customs laws. LLD was notified No, because the Commissioner of Customs has not yet rendered a decision on the Juris n of
of the seizure,but, before it claim for refund. Thejurisdiction of the Commissioner and the CTA are not concurrent in Tax dicti tax
2 could be heard, the Collector of so far as claims for refund are concerned.The only exception is when the Collector has
Customsissued a notice of sale not acted on the protested payment for a long time, the continuedinaction of the
Remedi on and 2002
2
of the articles. In order to Collector or Commissioner should not be allowed to prejudice the taxpayer. (Nestle es of cust
restrain theCollector from Phils., Inc. v.Court of Appeals, GR No. 134114, July 6, 2001). CTA om
carrying out the order to sell, duti
LLD filed withthe Court of Tax
Appeals a petition for review es
withapplication for the issuance
of a writ of prohibition. It
alsofiled with the CTA an
appeal for refund of overpaid
taxeson its other importations
of raw materials which has
 beenpending with the Collector
of Customs. The Bureau of
Customs moved to dismiss the
case for lack of jurisdiction of
the Court of Tax Appeals.Will
an appeal to the CTA for tax
refund be possible? Explain
(2%)

On August 5, 1997, Adamson

Co., Inc. (Adamson) filed a
request for reconsideration of
the deficiency withholding tax
assessment on July 10, 1997,
covering the taxable year 1994.
After administrative hearings,
the original assessment of
P150,000.00 was reduced to
P75.000.00 and a modified The right of the Government to collect by judicial action has not prescribed. The filing of
Pres Pres
assessment was thereafter the request for reconsideration suspended the running of the prescriptive period and
issued on August 05, 1999. commenced to run again when a decision on the protest was made on August 5, 1999. Judicial cripti cript
2
Despite repeated demands, It must be noted that in all cases covered by an assessment, the period to collect shall Remedi ve ive 2002
3 Adamson failed and be five (5) years from the date of the assessment but this period is suspended by the es Peri Peri
refused to pay the modified filing of a request for reconsideration which was acted upon by the Commissioner of
assessment. Consequently, the Internal Revenue (CIR v. Wyeth Suaco Laboratories, Inc., 202 SCRA 125 [1991]). od od
BIR brought an action for
collection in the Regional Trial
Court on September 15, 2000.
Adamson moved to dismiss
the action on the ground that
the government's right to
collect the tax by judicial action
has prescribed. Decide the
case. (5%)
 In the investigation of the
withholding tax returns of
AZMedina Security Agency (AZ
Medina) for the taxable
years1997 and 1998, a
discrepancy between the taxes
withheldfrom its employees
and the amounts actually
remitted to the government Pre-
was found. Accordingly, before
the period of prescription
asse
commenced to run, the BIR ssm
No, the contention of the counsel is untenable. Section 228 of the Tax Code expressly Juris
issued anassessment and a
provides that nopre-assessment notice is required when a discrepancy has been ent
demand letter calling for the Judicial dicti
2 determined between the tax withheld and the amount actually remitted by the noti
immediatepayment of the
withholding agent. Since the amount assessed relates to deficiency withholding taxes,
Remedi on 2002
4 deficiency withholding taxes in ce
the BIR is correct in issuing the assessment and demand letter calling for the immediate es of
the totalamount of not
P250,000.00. Counsel for AZ
payment of the deficiency withholding taxes. (Sec. 228, NIRC). CTA
nec
Medina protestedthe
assessment for being null and essa
void on the ground thatno pre- ry
assessment notice had been
issued. However, theprotest
was denied. Counsel then filed
a petition forprohibition with the
Court of Tax Appeals to
restrain thecollection of the
tax.A. Is the contention of the
counsel tenable? Explain(2%)
 In the investigation of the
withholding tax returns of AZ
Medina Security Agency (AZ
Medina) for the taxable years
1997 and 1998, a discrepancy
between the taxes withheld
from its employees and the
amounts actually remitted to
the government was found.
Accordingly, before the period
of prescription commenced to
run, the BIR issued an Pre-
assessment and a demand
The special civil action for prohibition will not prosper, because the CTA has no
asse
letter calling for the immediate ssm
jurisdiction to entertain the same.
payment of the deficiency Juris
withholding taxes in the total
The power to issue writ of injunction provided for under Section 11 of RA 1125 is only ent
ancillary to its appellate Judicial dicti
2 amount of P250,000.00. noti
Counsel for AZ Medina
jurisdiction. The CTA is not vested with original jurisdiction to issue writs of prohibition or Remedi on 2002
5 injunction independently of ce
protested es of
and apart from an appealed case. The remedy is to appeal the decision of the BIR. not
the assessment for being null
(Collector v. Yuseco, 3 SCRA 313 CTA
and void on the ground that nec
[1961]).
no pre-assessment notice had essa
been issued. However, the ry
protest was denied. Counsel
then filed a petition for
prohibition with the Court of
Tax Appeals to restrain the
collection of the tax.Will the
special civil action for
prohibition
brought before the CTA under
Sec. 11 of R.A, No. 1125
prosper? Discuss your answer.
(3%)
 Minolta Philippines, Inc.
(Minolta) is an EPZA-
registeredenterprise enjoying
preferential tax treatment under
aspecial law. After investigation
of its withholding tax returnsfor
the taxable year 1997, the BIR
issued a deficiencywithholding
tax assessment in the amount
of P150.000.00.On May 15,
1999, because of financial
difficulty, thedeficiency tax Civil
remained unpaid, as a result of Yes, BIR's action for collection will prosper because the assessment is already final and Taxp
and
which theassessment became executory, it can alreadybe enforced through judicial action. As counsel of Minolta, I will ayer'
final and executory. The BIR introduce evidence that the income payment was reported by the payee and the income Tax Cri
2 s
also found that, in violation of tax was paid thereon in 1997 so that my client may only be allowed to pay the civil Remedi min 2002
6 the provisions of the National penalties for non-withholding pursuant to RMO No. 38-83. [Note: It is not clear whether Rem
es al
Internal Revenue Code, this is a case ofnon-withholding/ underwithholding or non-remittance of taxwithheld. As edie
Minolta did not file its final such, the tax counsel may be open to otherremedies against the assessment.] Acti
s
corporate income tax return for on
the taxable year 1998, because
it allegedly incurred net loss
from its operations.On May 17,
2002, the BIR filed with the
Regional TrialCourt an action
for collection of the deficiency
withholdingtax for 1997.A. Will
the BIR's action for collection
prosper? Ascounsel of Minolta,
what action will you take?
Explain youranswer. (5%)
 Minolta Philippines, Inc.
(Minolta) is an EPZA-registered
enterprise enjoying preferential
tax treatment under a
special law. After investigation
of its withholding tax returns
for the taxable year 1997, the
BIR issued a deficiency
withholding tax assessment in
the amount of P150.000.00.
On May 15, 1999, because of
financial difficulty, the
deficiency tax remained
All criminal violations of the Tax Code may be compromised except those already filed
unpaid, as a result of which the
in court or those
assessment became final and
executory. The BIR also found
involving fraud (Section 204, NIRC). Accordingly, if Minolta makes a voluntary offer to Civil
compromise the criminal violations for non-filing and non-payment of taxes for the year Taxp
that, in violation of the and
provisions of the National
1998, the Commissioner may accept the offer which is ayer'
allowed by law. However, if it can be established that a tax has not been paid as a Tax Cri
2 Internal Revenue Code, s
Minolta did not file its final
consequence of non-filing of the Remedi min 2002
7 return, the civil liability for taxes may be dealt with independently of the criminal Rem
corporate income tax return for es al
violations. The compromise edie
the taxable year 1998, because
settlement of the criminal violations will not relieve the taxpayer from its civil liability. But Acti
it allegedly incurred net loss s
the civil liability for taxes on
from its operations.
may also be compromised if the financial position of the taxpayer demonstrates a clear
On May 17, 2002, the BIR filed
inability to pay the tax.
with the Regional Trial
Court an action for collection of
the deficiency withholding
tax for 1997. May criminal
violations of the Tax Code be
compromised? If Minolta
makes a voluntary offer to
compromise the criminal
violations for non-filing and
non-payment of taxes for the
year 1998, may the
Commissioner accept the
offer? Explain (5%)
 Mr. Chan, a manufacturer of
garments, was investigated
forfailure to file tax returns and
to pay taxes for the taxable
year 1997. Despite the
subpoena duces tecum issued
to him, he refused to present
and submit his books of
accounts andallied records.
Investigators, therefore, raided
his factory and seized several
bundles of manufactured
garments, supplies and unpaid Exti
imported textile materials. After Taxp ncti
The motion to dismiss should be denied. The satisfaction of the civil liability is not one of
hisapprehension and based on
the testimony of a
the grounds for the extinctionof criminal action (People v. Ildefonso Tierra, 12 SCRA 666 ayer' on
[1964]). Likewise, the payment of the tax due afterapprehension shall not constitute a Tax
2 formeremployee, deficiency s of
income and business taxes
valid defense in any prosecution for violation of any provision of the Tax Code(Sec. Remedi 2002
8 253[a], NIRC). However, the garments and materials seized from the factory should be Rem crim
wereassessed against Mr. es
Chan on April 15, 2000. It was
ordered returned because the payment of the tax had released them from any lien that edie inal
the Government has over them. s liabi
thenthat he paid the taxes.
Criminal action was lity
nonethelessinstituted against
him in the Regional Trial Court
forviolation of the Tax Code.
Mr. Chan moved to dismiss
thecriminal case on the ground
that he had already paid
thetaxes assessed against him.
He also demanded the return
ofthe garments and materials
seized from his factory. How
will you resolve Mr. Chan's
motion? (5%)

It is considered inherent in a sovereign State because it is a necessary

Legi
attribute of sovereignty. Without this power no sovereign State can exist or General
Pow slati
Why is the power to tax endure. The power to tax proceeds upon the theory that the existence of a Principl
er of ve
1 considered inherent in a government is a necessity and this power is an essential and inherent es of 2003
Taxa in
sovereign State? (4%) attribute of sovereignty, belonging as a matter of right to every independent Taxatio
tion Nat
state or government. No sovereign state can continue to exist without the n
ure
means to pay its expenses; and that for those means, it has the right to
 compel all citizens and property within its limits to contribute, hence, the
emergence of the power to tax. (51 Am. Jur.,Taxation 40).

No. Congress cannot abolish what is expressly granted by the fundamental Local
May Congress, under the Pow
law. The only authority conferred to Congress is to provide the guidelines and Govern
1987 Constitution, abolish er of Lega
2 limitations on the ment 2003
the power to tax of local Taxa lity
local government's exercise of the power to tax (Sec. 5, Art. X, 1987 Taxatio
governments? (4%) tion
Constitution). n
A "fringe benefit" is defined
It is the employer who is legally required to pay an income tax on the fringe
as being any good, service
benefit. The fringe benefit tax is imposed as a FINAL WITHHOLDING TAX Emp
or other benefit furnished
placing the legal obligation to remit the tax on the employer, such that, if the Fring loye
or granted in cash or in kind
tax is not paid the legal recourse of the BIR is to go after the employer. Any Income e r
by an employer to an
3 amount or value received by the employee as a fringe benefit is considered Taxatio Bene Req 2003
individual employee. Would
tax paid hence, net of the income tax due thereon. The person who is legally n fit uire
it be the employer or the
required to pay (same as statutory incidence as distinguished from economic Tax d To
employee who is legally
incidence) is that person who, in case of non-payment, can be legally Pay
required to pay an income
demanded to pay the tax.
tax on it? Explain. (4%)
 On 30 June 2000, X took
out a life insurance policy
on his own life in the
amount of P2,000,000.00.
He designated his wife, Y,
as irrevocable beneficiary
to P1,000,000.00 and his
son, Z, to the balance of
P1,000,000.00 but, in the (a) No. The law explicitly provides that proceeds of lifeinsurance policies paid Life
Exclu
latter designation, reserving to the heirs or beneficiaries upon the death of the insured are excluded from Insu
Income sions
his right to substitute him gross income and is exempt from taxation. The proceeds of life insurance ranc
4 Taxatio and 2003
for another. On 01 received upon the death of the insured constitute a compensation for the loss e
n Inclu
September 2003, X died of life, hence a return of capital, which is beyond the scope of income Poli
sions
and his wife and son went taxation. (Section 32(B)(1) 1997 Tax Code) cy
to the insurer to collect the
proceeds of X's life
insurance policy. (8%) (a)
Are the proceeds of the
insurance subject to income
tax on the part of Y and Z
for their respectiveshares?
Explain.
On 30 June 2000, X took
out a life insurance policy (b) Only the proceeds of P1,000,000.00 given to the son, Z, shall form part of
on his own life in the the Gross Estate of X. Under the Tax Code, proceeds of life insurance shall
amount of P2,000,000.00. form part of the gross estate of the decedent to the extent of the amount Life
He designated his wife, Y, receivable by the beneficiary designated in the policy of the insurance except Gros Insu
as irrevocable beneficiary when it is expressly stipulated that the designation of the beneficiary is Estate s ranc
5 2003
to P1,000,000.00 and his irrevocable. As stated in the problem, only the designation of Y is irrevocable Tax Estat e
son, Z, to the balance of while the insured/decedent reserved the right to substitute Z as e Poli
P1,000,000.00 but, in the beneficiary for another person. Accordingly, the proceeds received by Y shall cy
latter designation, reserving be excluded while the proceeds received by Z shall be included in the gross
his right to substitute him estate of X. (Sect/on 85(E), 1997 Tax Code)
for another. On 01
 September 2003, X died
and his wife and son went
to the insurer to collect the
proceeds of X's life
insurance policy. (8%)

(b) Are the proceeds of the

insurance to form part of
the gross estate of X?
Explain.

X, while driving home from

his office, was seriously
injured when his
automobile was bumped
from behind by a bus driven
by a reckless driver. As a
Com
result, he had to pay
pen
P200,000.00 to his doctor
Nothing is taxable. Under the Tax Code, any amount received as sati
and P100, 000.00 to the
compensation for personal injuries or sickness, plus the amounts for any on
hospital where he was Exclu
damages received whether by suit or agreement, on account of such injuries for
confined for treatment. He Income sions
or sickness shall be excluded from gross income. Since the entire amount of pers
6 filed a suit against the bus Taxatio and 2003
P450, 000.00 received are award of damages on account of the injuries onal
driver and the bus company n Inclu
sustained; all shall be excluded from his gross income. Obviously, these injur
and was awarded andpaid sions
damages are considered by law as mere return of capital. (Section 32(B)(4), ies
actual damages of
1997 Tax Code) and
P300,000.00 (for his doctor
sick
and hospitalization bills),
ness
P100,000.00 by way of
moral damages, and
P50,000.00 for what he had
to pay his attorney for
bringing his case to court.
Which, if any, of the
 foregoing awards are
taxable income to X and
which are not? Explain.
(8%)

(a) The term "capital asset" regards all properties not specifically excluded in
the statutory definition of capital assets, the profits or loss on the sale or the
exchange ofwhich are treated as capital gains or capital losses. Conversely, all
those properties specifically excluded are considered as ordinary assets and
the profits or losses realized must have to be treated as ordinary gains or
Capi
ordinary losses. Accordingly, "Capital Assets" includes property held by the
tal
taxpayer whether or not connected with his trade or business, but the term General
Capit Asse
does not include any of the following, which are consequently considered Principl
Distinguish a "capital asset" al t vs.
7 "ordinary assets":(1) stock in trade of the taxpayer or other property of a kind es of 2003
from an "ordinary asset". Gain Orid
which would properly be included in the inventory of the taxpayer if on hand Taxatio
Tax nary
at the close of the taxable year;(2) property held by the taxpayer primarily for n
Asse
sale to customers in the ordinary course of trade or business;(3) property used
t
in the trade or business of a character which is subject to the allowance for
depreciation provided in Section 34 (F) of the Tax Code; or(4) real property
used in trade or business of thetaxpayer.The statutory definition of "capital
assets" practically excludes from its scope, it will be noted, all property held by
the taxpayer if used in connection with his trade or business.
 It is to insure that only costs or expenses incurred in earning the income shall
be deductible for income tax purposes consonant with the requirement of the
law thatonly necessary expenses are allowed as deductions from gross
income. The term "NECESSARY EXPENSES" presupposes that in order to be
allowed as deduction, theexpense must be business connected, which is not
the case insofar as capital losses are concerned. This is also the reason why all
non-business connected expenses likepersonal, living and family expenses, are
What is the rationale for
not allowed as deduction from gross income (Section 36(A)(1) of the 1997 Tax Capi
the rule prohibiting the Income Ded
Code).The prohibition of deduction of capital losses from ordinary gains is tal
8 deduction of capital losses Taxatio uctio 2003
designed to forestall the shifting of deductions from an area subject to lower Loss
from ordinary gains? n n
taxes to an areasubject to higher taxes, thereby unnecessarily resulting in es
Explain.
leakage of tax revenues. Capital gains are generally taxed at a lower rate to
prevent, among others, the bunching of income in one taxable year which is a
liberality in the law begotten from motives of public policy (Rule on Holding
Period). It stands to reason therefore, that if the transaction results in loss, the
same should be allowed only from and to the extent of capital gains and not
to be deducted from ordinary gains which are subject to a higher rate of
income tax. (Chirelstein, Federal Income Taxation, 1977 Ed.)

On 03 January 1998, X, a
Filipino citizen residing in
the Philippines, purchased
one hundred (100) shares in No. Stock dividends are not realized income. Accordingly, the different
the capital stock of Y provisions of the Tax Code imposing a tax on dividend income only includes
Stoc
Corporation, a domestic within its purview cash and
Income Exe k
company. On 03 January property dividends making stock dividends exempt from income tax. However,
9 Taxatio mpti Divi 2003
2000, Y Corporation if the distribution of stock dividends is the equivalent of cash or property, as
n on den
declared, out of the profits when the distribution results in a change of ownership interest of the
ds
of the company earned shareholders, the stock dividends will be subject to income tax. (Section
after 01 January 1998, a 24(B)(2); Section 25(A)&(B); Section 28(B)(5)(b), 1997 Tax Code)
hundred percent (100%)
stock dividends on all
stockholders of record
 as of 31 December 1999 as
a result of which X holding
in Y Corporation became
two hundred (200) shares.
Are the stock dividends
received by X subject to
income tax? Explain. (8%)

Prini
(a) TAX BENEFIT RULE states that the taxpayer is obliged to declare as taxable
cipl
income subsequent recovery of bad debts in the year they were collected to
e
the extent of the tax benefit enjoyed by the taxpayer when the bad debts General
Tax und
were written-off and claimed as a deduction from income. It also applies to Principl
1 (a) What is meant by the Bene er
taxes previously deducted from gross income but which were subsequently es of 2003
0 "tax benefit rule"? fit the
refunded or credited. The taxpayer is also required to report as taxable Taxatio
Rule Tax
income the subsequent tax refund or tax credit granted to the extent of the n
Ben
tax benefit the taxpayer enjoyed when such taxes were previously claimed as
efit
deduction from income.
Rule
(b) X Company has a business connected receivable amounting to P100,000.00
Illus
from Y who was declared bankrupt by a competent court. Despite earnest
trati
efforts to collect the same, Y was not able to pay, prompting X Company to General
Tax on
(b) Give an illustration of write-off the entire liability. During the year of write-off, the entire amount Principl
1 Bene of
the application of the tax was claimed as a deduction for income tax purposes reducing the taxable net es of 2003
1 fit the
benefit rule. income of X Company to only P1,000,000.00. Three years later, Y voluntarily Taxatio
Rule appl
paid his obligation previously written-off to X Company. In the year of n
icati
recovery, the entire amount constitutes part of gross income of X Company
on
because it was able to get full tax benefit three years earlier.
 X dies in year 2000 leaving a
bank deposit of
P2,000,000.00 under joint
No. The Commissioner of Internal Revenue has the authority to inquire into
account with his associates
bank deposit accounts of a decedent to determine his gross estate
in a law office. Learning of
notwithstanding the
X's death from the
provisions of the Bank Secrecy Law. Hence, the banks holding the deposits in
newspapers, the Secr
question may not refuse to disclose the amount of deposits on the ground of
Commissioner of Internal ecy
secrecy of bank
Revenue wrote to every Gros of
deposits. (Section 6(F) of the 1997 Tax Code). The fact that the deposit is a
1 bank in the country asking Estate s Ban
joint account will not preclude the Commissioner from inquiring thereon 2003
2 them to disclose to him the Tax Estat k
because the law mandates that if a bank has knowledge of the death of a
amount of deposits that e Dep
person, who maintained a bank deposit account alone, or jointly with another,
might be outstanding in his osit
it shall not allow any withdrawal from the said deposit account, unless the
name or jointly with others Law
Commissioner has certified that the taxes imposed thereon have been paid.
at the date of his death.
(Section 97 of the 1997 Tax Code). Hence, to be able to give the required
May the bank holding the
certification, the inclusion of the deposit is imperative, which may be made
deposit refuse to comply on
possible only through the inquiry made by the Commissioner.
the ground of the Secrecy
of Bank Deposit Law?
Explain. (8%)
X is a friend of Y, the
chairman of Political Party
The donation to Y, once he becomes a candidate for an elective post, is not
Z, who wants to run for
subject to donor's tax provided that he complies with the requirement of filing Don
President in the 2004
returns of atio
elections. Knowing that Y
contributions with the Commission on Elections as required under the n to
needs funds for posters and
Omnibus Election Code. Exe a
1 streamers, X is thinking of Donor's
mpti Polit 2003
3 donating to Y P150,000.00 Tax
The answer would be the same if X had donated the amount to Political Party on ical
for his campaign. He asks
Z instead of to Y directly because the law places in equal footing any Can
you whether his intended
contribution to any dida
donation to Y will be
candidate, political party or coalition of parties for campaign purposes. te
subject to the donor's tax.
(Section 99(C) of the 1997 Tax Code).
What would your answer
be? Will your answer be the
 same if he were to donate
to Political Party Z instead
of to Y directly? (8%)

X and his wife, Y, Filipinos

living in the Philippines,
went on a three-month
pleasure trip around the
world during the months of
No. The term "returning residents" refers to nationals who have stayed in a
June, July and August 2002.
foreign country for a period of at least six (6) months. (Section 105(f) of the
In the course of their trip,
Tariff and Customs Code). Due to their limited duration of stay abroad X and Y Retu Tou
they accumulated some
are not considered as "returning residents" but they are merely considered as Tariff rning rist/
1 personal effects which were
travelers or tourists who enjoy the benefit of conditionally free and Resi Trav 2003
4 necessary, appropriate and importation.[Note: Credit must likewise be given if the candidate answered in Cutoms dent eler
normally used in leisure
the affirmative, considering that travelers or tourists are given the same tax s s
trips, as well as souvenirs in
treatment as that of returning residents, treating their personal effects, not in
non-commercial quantities.
commercial quantities, as conditionally free importation.]
Arethey "returning
residents" for purposes of
Section 105 of the Tariff
and Customs Code? Explain.
(8%)
 The ordinance is in violation of the Rule of Uniformity and Equality, which
requires that all subjects or objects of taxation, similarly situated must be
The City of Makati, in order
treated alike in equal footing and must not classify the subjects in an arbitrary
to solve the traffic problem
manner. In the case at bar, the ordinance exempts cars carrying more than
in its business districts,
two occupants from coverage of the said ordinance. Furthermore, the
decided to impose a tax, to Rule Rule
ordinance only imposes the tax on private cars and exempts public vehicles
be paid by the driver, on all of of
from the imposition of the tax, although both contribute to the traffic Local
private cars entering the Unif Unif
problem. There exists no substantial standard used in the classification by the Govern
1 city during peak hours from ormi orm
City of Makati. ment 2003
5 8:00 a.m. to 9:00 a.m. from ty ity
Taxatio
Mondays to Fridays, but and and
Another issue is the fact that the tax is imposed on the driver of the vehicle n
exempts those cars carrying Equa Equ
and not on the registered owner of the same. The tax does not only violate
more than two occupants, lity ality
the requirement of
excluding the driver. Is the
uniformity, but the same is also unjust because it places the burden on
ordinance valid?
someone who has no control over the route of the vehicle. The ordinance is,
Explain. (8%)
therefore, invalid for violating the rule of uniformity and equality as well as for
being unjust.
In order to raise revenue
for the repair and
maintenance of the newly
constructed City Hall of
Makati, the City Mayor
ordered the collection of No. The imposition of a tax, fee or charge or the generation of revenue under
Local Pow
P1.00, called "elevator tax", the Local Government Code, shall be exercised by the SANGUNIAN of the local
Govern Local er
1 every time a person rides government
ment Taxa to 2003
6 any of the high-tech unit concerned through an appropriate ordinance (Section 132 of the Local
Taxatio tion Imp
elevators in the city Government Code). The city mayor alone could not order the collection of the
n ose
hall during the hours of tax; as such, the "elevator tax" is an invalid imposition.
8:00 a.m. to
10:00 a.m. and 4:00 p.m. to
6:00 p.m. Is the "elevator
tax" a valid imposition?
Explain. (8%)
 X, a taxpayer who believes
that an ordinance passed
by the City Council of Pasay
is unconstitutional for being
discriminatory against him,
want to know from you, his
tax lawyer, whether or not The appeal should be made with the Secretary of Justice. Any question on the Local
he can file an appeal. In the constitutionality or legality of a tax ordinance may be raised on appeal with Govern Juris
1 App
affirmative, he asks you the Secretary of Justice within 30 days from the effectivity thereof. (Sec. 187, ment dicti 2003
7 eal
where such appeal should LGC; Hagonoy Market Vendor Association v. Municipality of Hagonoy, 376 Taxatio on
be made: the Secretary of SCRA 376 [2002]). n
Finance, or the Secretary of
Justice, or the Court of Tax
Appeals, or the regular
courts. What would your
advice be to your client, X?
(8%)
Under Article 415 of the
Civil Code, in order for
machinery and equipment
to be considered real
property, the pieces must
be placed by the owner of Yes. The properties are considered as necessary fixtures of the gasoline
the land and, in addition, station, without which the gasoline station would be useless. Machinery and Real Exclu
must tend to directly meet equipment installed by the lessee of the leased land is not real property for Propert sions
1 Leas
the needs of the industry or purposes of execution of a final judgment only. they are considered as real y and 2003
8 e
works carried on by the property for real property tax purposes as "other improvements to affixed or Taxatio Inclu
owner. Oil companies attached real property under the Assessment Law and the Real Property Tax n sions
install underground tanks in Code. (Caltex v Central Board of Assessment Appeals, 114 SCRA 296 [1982])
the gasoline stations
located on land leased by
the oil companies from the
owners of the land where
the gasoline stations [are]
 located. Are those
underground tanks, which
were not placed there by
the owner of the land but
which were instead placed
there by the lessee of the
land, considered real
property for purposes of
real property taxation
under the local
Government Code? Explain.
(8%)
Taxes are assessed for the
purpose of generating
revenue to be used for
public needs. Taxation itself
is the power by
which the State raises
revenue to defray the
expenses of
government. A jurist said Taxes are levied by the executive branch of government. This statement is Legi
General Purp
that a tax is what we pay erroneous because levy refers to the act of imposition by the legislature which slati
Principl ose
1 for is done through the enactment of a tax law. Levy is an exercise of the power ve
es of of 2004
9 civilization. to tax which is exclusively legislative in nature and character. Clearly, taxes are in
Taxatio Taxa
not levied by the executive branch of government. (JVPC v. Albay, 186 SCRA Nat
n tion
In our jurisdiction, which of 198 [1990]). ure
the following statements
may be erroneous:
1) Taxes are pecuniary in
nature.
2) Taxes are enforced
charges and contributions.
3) Taxes are imposed on
persons and property
within the territorial
jurisdiction of a State.
4) Taxes are levied by the
executive branch of the
government.
5) Taxes are assessed
according to a reasonable
rule of apportionment.

Justify your answer or

choice briefly. (5%)
 Which of the following
propositions may now be
untenable:1) The court
should construe a law 2. The court should construe a law granting a municipal corporation the power
granting tax exemption to tax most strictly.This proposition is now untenable. The basic rationale for
strictly against the the grant of tax power to local government units is to safeguard their viability
taxpayer. 2) The court and self-sufficiency by directly granting them general and broad tax powers
should construe a law (Manila Electric Company v. Province of Laguna et. al., 306 SCRA 750 [1999]).
granting a municipal Considering that inasmuch as the power to tax may be exercised by local
corporation the power to legislative bodies, no longer by valid congressional delegation but by direct
tax most strictly.3) The authority conferred by the Constitution, in interpreting statutory provisions on General Purp
Inte
Court of Tax Appeals has municipal fiscal powers, doubts will, therefore, have to be resolved in favor of Principl ose
2 rpre
jurisdiction over decisions municipal corporations (City Government of San Pablo, Laguna v. Reyes, 305 es of of 2004
0 tati
of the Customs SCRA 353 [1999]). This means that the court must adopt a liberal construction Taxatio Taxa
on
Commissioner in cases of a law granting a municipal corporation the power to tax.Note: If the n tion
involving liability for examinee chose proposition no. 4 as his answer, it should be given full credit
customs duties.4) The Court considering that the present CTA Act (R.A. No. 9282) has made theCTA a
of Appeals has jurisdiction coequal judicial body of the Court of Appeals. The question "Which of the
to review decisionsof the following propositions may now be untenable" may lead the examinee
Court of Tax Appeals. 5) The tochoose a proposition which is untenable on the basis of the new law despite
Supreme Court has the cut-off date adopted by the Bar Examination Committee. R.A. No. 9282
jurisdiction to review was passed on March 30, 2004.
decisions of the Court of
Appeals.Justify your answer
or choice briefly. (5%)
 RC is a law-abiding citizen
who pays his real estate
taxes
promptly. Due to a series of
typhoons and adverse
economic conditions, an
ordinance is passed by MM
City
granting a 50% discount for
payment of unpaid real
estate
taxes for the preceding year
and the condonation of all
Rem
penalties on fines resulting
issio
from the late payment. The suit will not prosper. The remission or condonation of taxes due and
Local n/C
Arguing payable to the exclusion of taxes already collected does not constitute unfair
Govern Local ond
2 that the ordinance rewards discrimination. Each set of taxes is a class by itself and the law would be open
emnt Taxa onat 2004
1 delinquent taxpayers and to attack as class legislation only if all taxpayers belonging to one class were
Taxatio tion ion
discriminates against not treated alike (Juan Luna Subdivision, Inc., v. Sarmiento, 91 Phil. 371
n of
prompt ones, RC demands [1952]).
Tax
that he be
es
refunded an amount
equivalent to one-half of
the real taxes he paid. The
municipal attorney
rendered an opinion that
RC cannot be reimbursed
because the ordinance did
not provide for such
reimbursement. RC files
suit to declare the
ordinance void on the
ground that it is a class
legislation. Will his suit
 prosper? Explain your
answer briefly. (5%)

A law was passed granting

tax exemption to
certainindustries and
investments for a period of
five years. Butthree years
later, the law was repealed. The contention is not tenable. The exemption granted is in the nature of a
Exe
With the repeal, the unilateral tax exemption. Since the exemption given is spontaneous on the
mpt
exemptions were part of the legislature and no service or duty or other remunerative conditions
General ions
considered revoked by the have been imposed on the taxpayers receiving the exemption, it may be Tax
Principl are
2 BIR, which assessed the revoked at will by the legislature(Christ Church v. Philadelphia, 24 How. 300 Exe
es of Unil 2004
2 investing companies for [1860]). What constitutes an impairment of the obligation of contracts is the
Taxatio
mpti
ater
unpaid taxes effective on revocation of an exemption which is founded on a valuable consideration ons
n al in
the date of the repeal of because it takes the form and essence of a contract (Casanovas v. Hord, 8 Phil.
Nat
the law.NPC and KTR 125 [1907]; Manila Railroad Company v. Insular Collector of Customs, 12 Phil.
ure
companies questioned the 146 [1915])
assessments onthe ground
that, having made their
investments in fullreliance
with the period of
exemption granted by the
 law, its repeal violated their
constitutional right against
theimpairment of the
obligations and contracts. Is
thecontention of the
companies tenable or not?
Reason briefly.(5%)

XYZ Colleges is a non-stock,

non-profit educational
A. All of the income derived by the non-stock, nonprofit educational
institution run by the
institution will be exempt from taxation provided they are used actually,
Archdiocese of BP City. It
directly and exclusively for educational purposes. The Constitution provides
collected
that all revenues and assets of non-stock, non-profit educational institution
and received the following:
which are actually, directly and exclusively used for educational purposes are
(a) Tuition fees
exempt from taxation (Section 4 par. 3, Article XIV, 1987 Constitution).
(b) Dormitory fees Edu
(c) Rentals from canteen Tax cati
The donation is, likewise, exempt from the donor's tax if actually, directly and Income
2 concessionaires Exe onal
exclusively used for educational purposes, provided not more than 30% of the Taxatio 2004
3 (d) Interest from money- donation is used by the donee for administration purposes. The donee, being n
mpti Insti
market placements of the ons tuti
a non-stock, non-profit educational institution, is a qualified entity to receive
tuition ons
an exempt donation subject to conditions prescribed by law (Section 4 par. 4,
fees
Art. XIV, 1987 Constitution, in relation to Section 101(AX3), NJRC).
(e) Donation of a lot and
building by school alumni
Accordingly, none of the cited income and donation collected and received by
Which
the non-stock, non-profit educational institution would not be exempt from
of these above cited
taxation.
income and donation would
not be
 exempt from taxation?
Explain briefly. (5%)

Suppose that XYZ Colleges If XYZ Colleges is a proprietary educational institution, all of its income from
is a proprietary educational school related and non-school related activities will be subject to the income
Edu
institution owned by the tax based on its aggregate net income derived from both activities
Tax cati
Archbishop's family, rather (Section27(B), NMC). Accordingly, all of the income enumerated in the
2 Donor's Exe onal
than the Archdiocese, problem will be taxable.The donation of lot and building will likewise be 2004
4 which of those above cited Tax mpti Insti
subject to the donor's tax because a donation to an educational institution is
ons tuti
income and donation would exempt only if the school is incorporated as a non-stock entity paying no
ons
be exempt from taxation? dividends.Since the donee is a proprietary educational institution, the
Explain briefly.(5%) donation is taxable (Section 101(AX3), NJRC).
 Citing Section 10, Article
VIII of the 1987
Constitution
which provides that salaries
of judges shall be fixed by
law
No. The contention is incorrect. The salaries of judges are not tax-exempt and
and that during their
their taxability is not contrary to the provisions of Section 10, Article VIII of the
continuance in office their
Constitution on the non-diminution of the salaries of members of the judiciary
salary shall With
during their continuance in office. The clear intent of the Constitutional Income Cov
2 not be decreased, a judge holdi
Commission that framed the Constitution is to subject their salaries to tax as Taxatio erag 2004
5 of MM Regional Trial Court ng
in the case of all taxpayers. Hence, the deduction of withholding taxes, being a n e
questioned the deduction Tax
manner of collecting the income tax on their salary, is not a diminution
of withholding taxes from
contemplated by the fundamental law. (Nitafan et. al. v. CIR, 152 SCRA 284
his
[1987]).
salary since it results into a
net deduction of his pay. Is
the
contention of the judge
correct? Reason briefly.
(5%)
A municipality, BB, has an
ordinance which requires
that all stores, restaurants,
and other establishments No. The refusal of the mayor is not justified. The impositions are of different
selling liquor should pay a nature and character. The fixed annual fee is in the nature of a license fee Lice
Local
fixed annual fee of P20.000. imposed through the exercise of police power while the 5% tax on purchase or Dou nse
Govern
2 Subsequently, the consumption is a local tax imposed through the exercise of taxing powers. ble Fee
emnt 2004
6 municipal board proposed Both a license fee and a tax may be imposed on the same business or Taxa vs.
Taxatio
an ordinance imposing a occupation, or for selling the same article and this is not in violation of the rule tion Loca
n
sales tax equivalent to 5% against double taxation {Campania General de Tabacos de Filipinos v. City of l Tax
of the amount paid for the Manila, 8 SCRA 367 [1963]).
purchase or consumption of
liquor in stores, restaurants
and other establishments.
 The municipal mayor, CC,
refused to sign the
ordinance on the ground
that it would constitute
double taxation. Is the
refusal of the mayor
justified? Reason briefly.
(5%)

Due to an uncertainty
whether or not a new tax
law is applicable to printing
companies, DEF Printers
submitted a legal query to
the Burea of Internal
Revenue on that issue. The
BIR issued a ruling that Non
Non-
printing companies are not No. Reversal of a ruling shall not be given retroactive application if said -
General Retr
covered by the new tax law. reversal will be prejudicial to the taxpayer. Therefore, the BIR cannot assess Retr
Principl oacti
2 Relying on this ruling, DEF DEF Printers for back taxes because it would be violative of the principle of oact
es of vity 2004
7 Printers did not pay said non-retractivity of rulings and doing so would result in grave injustice to the
Taxatio of
ivity
tax.Subsequently, however, taxpayer who relied on the first rulinhg in good faith. (Section 246, NIRC; CIR v. of
n Rulin
the BIR reversed the ruling Burroughs, Inc., 142 SCRA 324 [1986]) Ruli
gs
and issued a new one ngs
stating that the tax covers
printing companies. Could
the BIR now assess DEF
Printers for back taxes
corresponding to the years
before the new ruling?
Reason briefly. (5%)
 In order that debts be considered as bad debts because they have become
PQR Corp. claimed as a worthless, the taxpayer should establish that during the year for which the
deduction in its tax returns deduction is sought, a situation developed as a result of which it became
theamount of P1,000,000 evident in the exercise of sound, objective business judgment that there
as bad debts. The remained no practical, but only vaguely theoretical, prospect that the debt
corporation wasassessed by would ever be paid (Collector of Internal Revenue v. Goodrich International
the Commissioner of Rubber Co., 21 SCRA 1336 [1967]). "Worthless" is not determined by an
Ele
Internal Revenue inflexible formula or slide rule calculation, but upon the exercise of sound
General men
fordeficiency taxes on the business judgment. The factors to be considered include, but are not limited
Principl ts of
2 ground that the debts to, the following:1 The debtor has no property nor visible income;2 The Bad
es of a 2004
8 cannot beconsidered as debtor has been adjudged bankrupt or insolvent;3 Collateral shares have
Taxatio
Debt
Bad
"worthless," hence they do become worthless; and4 There are numerous debtors with small amounts of
n Deb
not qualify as bad debts. debts and further action on the accounts would entail expenses exceeding the
t
The company asks for your amounts sought to be collected. ALTERNATIVE ANSWER:The following are the
advice on "What factors factors to be considered indetermining whether or not the debts are bad
will held in determining debts:1 The debt must be valid and subsisting;2 The debt is connected with
whether or not the debts the taxpayer's trade orbusiness, and is not between related parties;3 There is
are bad debts?" Answer an actual ascertainment that the debt isworthless; and4 The debt is charged-
and explain briefly. (5%) off within the taxable year.(PRC v. CA, 256 SCRA 667 [1996]; Revenue Regs.
No.5-99).
 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 charges Nat
for a period of three years. ure
A. No. Exemption from taxes is personal in nature and covers only taxes for
ABC Corp. was organized &
which the taxpayer-grantee is directly liable. The sales tax is a tax on the seller
and was granted such Tax Cov
who is not exempt from taxes. Since XYZ Inc. is directly liable for the sales tax Income
2 incentive. In the course of Exe erag
and no tax exemption privilege is ever given to him, therefore, its claim that Taxatio 2004
9 business, ABC Corp. the sale is tax exempt is not tenable. A tax exemption is construed in n
mpti e;
purchased mechanical ons Pro
strictissimi juris and it can not be permitted to exist upon vague implications
equipment from XYZ Inc. per
(Asiatic Petroleum Co., Ltd. V. Llanes, 49 Phil 466 [1926]).
Normally, the sale is subject Part
to a sales tax.a.) XYZ Inc. y
claims, however, that since
it sold the equipment to
ABC Corp. which is tax
exempt, XYZ should not be
liable to pay the sales tax. Is
this claim tenable? (5%)
 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 charges
for a period of three years.
ABC Corp. was organized
and was granted such
incentive. In the course of
business, ABC Corp.
Nat
purchased mechanical
ure
equipment from XYZ Inc.
&
Normally, the sale is subject B. No. The claim of ABC Corp. is not meritorious. Although the tax was shifted
Tax Cov
to a sales tax. to ABC Corp. by the seller, what is paid by it is not a tax but part of the cost it Income
3 Exe erag
has assumed. Hence, since ABC Corp. is not a taxpayer, it has no capacity to Taxatio 2004
0 b.) Assume arguendo that mpti e;
file a claim for refund. The taxpayer who can file a claim for refund is the n
ons Pro
XYZ had to and did pay the person statutorily liable for the payment of the tax.
per
sales tax. ABC Corp. later
Part
found out, however, that
y
XYZ merely shifted or
passed on to ABC the
amount of the sales tax by
increasing the purchase
price. ABC Corp. now claims
for a refund from the
Bureau of Internal Revenue
in an amount
corresponding to the tax
passed on to it since it is tax
exempt. Is the claim of ABC
Corp. meritorious? (5%)
 For failure to comply with
certain corporate
requirements,
the stockholders of ABC
Corp. were notified by the No. As a general rule, stockholders cannot be held personally liable for the
Securities and Exchange unpaid taxes of a dissolved corporation. The rule prevailing under our
Commission that the jurisdiction is that a corporation is vested by law with a personality that is
corporation separate and distinct from those of the persons composing it (Sunio v. NLRC,
General Corp Effe
would be subject to 127 SCRA 390{1984]}.
Principl orat ct of
3 involuntary dissolution. The NOTE: additional point should be given to the examinee if he answers in the
es of e Diss 2004
1 stockholders did not do following that: However, stockholders may be held liable for the unpaid taxes
Taxatio Exist oluti
anything to comply with the of a dissolved corporation if it appears that the corporate assets have passed
n ence on
requirements, and the into their hands (Tan Tiong Bio v. CFR, 4 SCRA 986 [1962]). Likewise, when
corporation was dissolved. stockholders have unpaid subscriptions to the capital of the corporation they
Can the can be made liable for unpaid taxes of the corporation to the extent of their
stockholders be held unpaid subscriptions.
personally liable for the
unpaid taxes of the
dissolved corporation?
Explain briefly. (5%)
 After the tax assessment
had become final and
unappealable, the
Commissioner of Internal
Revenue initiated the filing
of a civil action to collect
the tax due from NX. After Yes. The Commissioner has the power to accept the offer of compromise if the
several years, a decision financial position of the taxpayer clearly demonstrates a clear inability to pay
was rendered by the court the tax (Section 204, NIRC). As represented by NX in his offer, only 50% of the
ordering NX to pay the tax judgment award is all he could really afford. This is an offer for compromise
due plus penalties and based on financial incapacity which the Commissioner shall not accept unless
surcharges. The judgment accompanied by a waiver of the secrecy of bank deposits (Section 6[F}, NIRC).
became final and The waiver will enable the Commissioner to ascertain the financial position of
Judicial Com
3 executory, but attempts to the taxpayer, although the inquiry need not be limited only to the bank Lega
Remedi pro 2004
2 execute the judgment deposits of the taxpayer but also as to his financial position as reflected in his
es mise
lity
award were futile. financial statements or other records upon which his property holdings can be
Subsequently, NX offered ascertained.If indeed, the financial position of NX as determined by the
the Commissioner a Commissioner demonstrates a clear inability to pay the tax, the acceptance of
compromise settlement of the offer is legal and ethical because the ground upon which the compromise
50% of the judgment was anchored is within the context of the law and the rate of compromise is
award, representing that well within and far exceeds the minimum prescribed by law which is only 10%
this amount is all he could of the basic tax assessed.
really afford. Does the
Commissioner have the
power to accept the
compromise offer? Is it
legal and ethical? Explain
briefly. (5%)
 RAM got married to LISA
last January 2003. On
November
30, 2003, LISA gave birth to
twins. Unfortunately,
however, LISA died in the
course of her delivery. Due
to complications, one of the
twins also died on RAM should indicate "(b) married" as his civil status in
Mar
December 15, preparing his Income Tax Return for the year 2003. The death of his wife Pers
Income ried
3 2003. during the year will not change his status because should the spouse die onal
Taxatio Indi 2004
3 during the taxable year, the taxpayer may still claim the same exemptions Inco
n vidu
In preparing his Income Tax (that of being married) as if the spouse died at the close of such year (Section me
al
Return (ITR) for the year 35/Cj, NIRC).
2003, what should RAM
indicate in the ITR as his
civil
status: (a) single; (b)
married; (c) Head of the
family; (d)
widower; (e) none of the
above? Why? Reason. (5%)
 OXY is the president and
chief executive officer of
ADDComputers, Inc. When
OXY was asked to join
thegovernment service as
director of a bureau under
theDepartment of Trade No. The premium is not deductible because it is not an ordinary business
and Industry, he took a expense. The term "ordinary" is used in the income tax law in its common
leave ofabsence from ADD. significance and it has the connotation of being normal, usual or customary
Believing that its business (Deputy v. Du Pont, 308 US 488 [1940]). Paying premiums for the insurance of Ordi
outlook,goodwill and a person not connected to the company is not normal, usual or nary
opportunities improved customary.Another reason for its non-deductibility is the fact that it can be Income Ded Busi
3
with OXY in considered as an illegal compensation made to a government employee. This Taxatio uctio ness 2004
4
thegovernment, ADD is so because if the insured, his estate or heirs were made as the beneficiary n ns Exp
proposed to obtain a policy (because of the requirement of insurable interest), the payment of premium ens
of insuranceon his life. On will constitute bribes which are not allowed as deduction from gross income es
ethical grounds, OXY (Section 34[A][l][c], NIRC).On the other hand, if the company was made the
objected to theinsurance beneficiary, whether directly or indirectly, the premium is not allowed as a
purchase but ADD deduction from gross income (Section 36[A}14], NIRC).
purchased the policy
anyway.Its annual premium
amounted to P100,000. Is
said premium deductible by
ADD Computers, Inc.?
Reason. (5%)
 VCC is the administrator of
the estate of his father
NGC, in
the estate proceedings
pending before the MM
Regional
Trial Court. Last year, he
received from the
Commissioner
of Internal Revenue a
deficiency tax assessment
for the Pay
No. VCC's contention is not correct. The approval of the probate court is not
estate in the amount of men
necessary. Payment of estate taxes is a condition precedent for the
P1,000,000. But he ignored t vs.
distribution of the properties of the decedent and the collection of estate Juris
3 the Estate Pro
taxes is executive in nature for which the court is devoid of any jurisdiction. dicti 2004
5 notice. Last month, the BIR Hence, the approval of the court, sitting in probate, or as a settlement tribunal
Tax
on
bate
effected a levy on the real Proc
is not a mandatory requirement in the collection of estate taxes (Marcos H v.
properties of the estate to eedi
Court of Appeals, 273 SCRA 47 [1997]).
pay the delinquent tax. VCC ng
filed a motion with the
probate court to stop the
enforcement and collection
of the tax on the ground
that the BIR should have
secured first the approval
of the probate court, which
had jurisdiction over the
estate, before levying on its
real properties. Is VCC's
contention correct? (5%)
 RR disputed a deficiency tax
assessment and upon
receiptof an adverse
decision by the
RR should file a motion for injunction with the Court of Tax Appeals to stop
Commissioner of
the administrative collection process. An appeal to the CTA shall not suspend
InternalRevenue, filed an
the enforcement of the tax liability, unless a motion to that effect shall have
appeal with the Court of Defi
been presented in court and granted by it on the basis that such collection will
Tax Appeals.While the cien
jeopardize the interest of the taxpayer or the Government (Pirovano v. CIR, 14 Judicial Asse
3 appeal is pending, the BIR cy in
SCRA 832 [1965]).The CTA is empowered to suspend the collection ofinternal Remedi ssme 2004
6 served a warrant oflevy on Asse
revenue taxes and customs duties in cases pending appeal only when: (1) in es nt
the real properties of RR to men
the opinion of the court the collection by the BIR will jeopardize the interest of
enforce the collectionof the t
the Government and/or the taxpayer; and (2) the taxpayer is willing to deposit
disputed tax. Granting
the amount being collected or to file a surety bond for not more than double
arguendo that the BIR
the amount of the tax to be fixed by the court (Section 11, JR.A. No. 1125).
canlegally levy on the
properties, what could RR
do to stop the process?
Explain briefly. (5%)
On March 12, 2001, REN
paid his taxes. Ten months
later,
he realized that he had The appeal was not filed on time. The two-year period of limitation for filing a
overpaid and so he cliam for refund is not only a limitation for pursuing the claim at the
immediately filed a claim administrative level but also a limitation for appealing the case to the Court of
Clai Prec
for refund with the Tax Appeals. The law provides that "no suit or proceeding shall be filed after
Tax ms ripti
3 Commissioner of Internal the expiration of two years from the date of the payment of the etax or
Remedi for ve 2004
7 Revenue. penalty regardless of any supervening cause that may arise after payment
es Refu Peri
(Section 229, NIRC). Since the appeal was only made on March 24, 2003, more
nd od
On February 27, 2003, he than two years had already elapsed from the time the taxes were paid on
received the decision of the March 12, 2003. Accordingly, REN had lost his judicial remedy because of
Commissioner denying prescription.
REN's claim for refund. On
March 24, 2003, REN filed
an appeal with the Court of
Tax Appeals. Was his appeal
filed on time or not?
Reason. (5%)
 B. Yes, the suit is meritorious. The VAT is designed foreconomic efficiency;
hence, should be neutral to those who belong to the same class. Professionals
are a class of taxpayers by themselves who, in compliance with the rule of
equality of taxation, must be treated alike for tax purposes.Exempting lawyers
and doctors from a burden to which other professionals are subjected will
make the law discriminatory and violative of the equal protection clause of
A law was passed the Constitution. While singling out a class for taxation purposes will not
exempting doctors and infringe upon this constitutional limitation (Shell v. Vano, 94 Phil. 389 [1954]),
lawyers from theoperation singling out a taxpayer from a class will no doubt transgress the constitutional
of the value added tax. limitation (Ormoc Sugar Co. Inc., v. Treasurer of Ormoc City, 22 SCRA 603
Other [1968]). Treating doctors and lawyers as a different class of professionals will
professionalscomplained not comply with therequirements of a reasonable, hence valid classification,
and filed a suit questioning because the classification is not based upon substantial distinction which Con
Value- Exe
3 the law for makes real differences. The classification does not comply with the stitu
Added mpti 2004
8 beingdiscriminatory and requirement that it should be germane to the purpose of the law either.
Tax on
tion
violative of the equal (Pepsi-Cola Bottling Co., Inc. v. City of Butuan, 24 SCRA 789 [1968]).ANOTHER ality
protection clauseof the ANSWER:No. The suit is not meritorious. The equal protection clause of the
Constitution since Constitution merely requires that all persons subjected to legislation shall be
complainants were not treated alike, under like circumstances and conditions, both in the privileges
given the same exemption. conferred and in the liabilities imposed. The equality in taxation rule is not
Is the suit meritorious or violated if classifications or distinctions are made as long as the same are
not? Reasonbriefly. (5%) based on reasonable and substantial differences. {Pepsi-Cola Bottling Co., Inc.
v. City of Butuan, 24 SCRA 789 [1968]).In the instant case, the professions of
doctors and lawyers are not principally aimed at earning money but for the
service of the people. The exemption granted to doctors and lawyers from the
operation of the VAT is justified, as it is not discriminatory against the other
professionals because they have reasonable and substantial differences in the
conduct of their professions.
 The basis of dutiable value of an imported article subject to an ad valorem tax
Ordi
State and explain the basis under the Tariff and Customs Code is its TRANSACTION VALUE. (Sec. 201[A], Class
nary
of dutiable value of an Tariff and Customs Code, as amended by R.A. No. 9135) If such value could Tariff ificat
/
imported article subject to not be determined, then the following values are to be utilized in their and ion
1 regu 2005
an ad valorem tax under sequence: Transaction value of identical goods (Sec. 201[B]); Transaction Custom of
lar
the Tariff and Customs value of sirdondee@gmail.com 72 of 73 similar goods (Sec. 201[C]); Deductive s duti
duti
Code. value (Sec. II.E.1, CA.O. No. 4-2004); Computed value (Sec., II.F.l, C.A.O. No. 1- es
es
20040) and Fallback value. (Sec. 201[F]) (UP; PALS)
The distinctions between countervailing duty and dumping duty are the
following: (1) Basis: The countervailing duty is imposed whenever there is
granted upon the imported article by the country of origin a specific subsidy
Class
upon its production, manufacture or exportation and this results or threatens
Tariff ificat Spe
injury to local industry while the basis for the imposition of dumping duty is
Distinguish countervailing and ion cial
2 the importation and sale of imported items at below their normal value 2005
duty from dumping duty. Custom of duti
causing or likely to cause injury to local industry. (2) Amount: The
s duti es
countervailing duty imposed is equivalent to the value of the specific subsidy
es
while the dumping duty is equivalent to the margin of dumping which is equal
to the difference between the export price to the Philippines and the normal
value of the imported article. (UP; PALS)
No, Jacob is not liable for taxes on his personal computer and the car because
Gen
he is tax-exempt by law. He has met the following requirements for
eral Imp
exemption under P.D. No. 922 (1976): a) b) c) tour of duty; and d) He has not
Jacob, after serving a 5-year rule: orta
availed of the tax exemption for the past four (4) years. He was a military
tour of duty as military all tion
attache assigned to Jakarta; He has served abroad for not less than two (2)
attaché in Jakarta, returned impo by
years; He is returning to the Philippines after serving his He is entitled to tax Tariff
to the Philippines bringing rted the
exemption on his personal and household effects including a car; provided, a) and
3 with him his personal articl gov 2005
The car must have been ordered or purchased prior to the receipt by the Custom
effects including a personal es ern
Philippine mission or consulate in Jakarta of Jacob's recall order; b) the car is s
computer and a car. Would are men
registered in Jacob's name; c) the exemption shall apply to the value of the
Jacob be liable for taxes on subj t
car; d) the exemption shall apply to the aggregate value of his personal and
these items? Discuss fully. ect taxa
household effects (including the personal computer) not exceeding thirty per
to ble
centum (30%) of the total amount received by Jacob as salary and allowances
duty
during his assignment in Jakarta, but not to exceed four (4) years; e) Jacob
 must not have availed of the exemption more oftener than one every four
years. (Last par., Sec. 105, Tariff and Customs Code) (UP; PALS)

No, taxes cannot be the subject of set-off even when there is a final judgment
for a sum of money against the local government making the assessment. The
government and the taxpayer are not the "mutual creditors and debtors" of
each other who can avail of the remedy of compensation which Art. 1278 Taxp
Can an assessment for a
(Civil Code) is sirdondee@gmail.com 13 of 73 referring to Republic of the ayer'
local tax be the subject of
Philippines v. Mambulao Lumber Co., G.R. No. L-17725, February 28, 1962; s Tax
set-off or compensation Local
and Francia v. Intermediate Appellate Court, G.R. No. L-67649, June 28,1998. rem pay
against a final judgment for Govern
There is, however, legal basis to state that an assessment for a local tax may edie er's
4 a sum of money obtained ment 2005
be the subject of set-off or compensation against a final judgment for a sum of s rem
by the taxpayer against the Taxatio
money obtained by the taxpayer against the local government by operation of (Loc edie
local government that n
law where the local government and the taxpayer are in their own right al s
made the assessment?
reciprocally debtors and creditors of each other, and that the debts are both Taxe
Explain.
due and demandable. This is consistent with the ruling in Domingo v. Garlitos, s)
G.R. No. L-18994, June 29,1963, relying upon Arts. 1278 and 1279 of the Civil
Code, where these provisions were applied in relation to the national tax, and
should therefore be applicable to a local tax. (UP; PALS)
 I would advise the lot owners that a city, even if it is outside Metro Manila,
may levy an annual tax on idle lands at the rate not exceeding five percent
(5%) of the assessed value of the property which shall be in addition to the
A city outside of Metro
basic real property tax. (Sec. 236, Local Government Code) I would likewise
Manila plans to enact an
advise them that the levy may apply to residential lots, regardless of land
ordinance that will impose
area, in subdivisions duly approved by proper authorities, the ownership of Spe
a special levy on idle lands
which has been transferred to individual owners who shall be liable for the Colle cial
located in residential
additional tax. (Last par., Sec. 237) The term "Idle Lands" means, land not Real ction Levi
subdivisions within its
devoted directly to any crop or to any definite purpose for at least one year Propert of es
territorial jurisdiction in
5 prior to the notice of expropriation, except for reasons other than force y real on 2005
addition to the basic real
majeure or any fortuitous event, but used to be devoted or is suitable to such Taxatio prop real
property tax. If the lot
crop or is contiguous to land devoted directly to any crop and does not include n erty pro
owners of a subdivision
land devoted permanently or regularly to other essential and more productive tax pert
located in the said city seek
purpose. (Philippine Legal Encyclopedia, by Sibal, 1986 Ed.) Finally, I would y
your legal advice on the
advise them to construct or place improvements on their idle lands by making
matter, what would your
valuable additions to the property or ameliorations in the land's conditions so
advice be? Discuss.
the lands would not be considered as idle. (Sec. 199[m]) In this manner their
properties would not be subject to the ad valorem tax on idle lands. (UP;
PALS)
Mr. Fermin, a resident of
Quezon City, is a Certified
Spec
Public Accountant-Lawyer
ific
engaged in the practice of
taxin
his two professions. He has
g
his main office in Makati No. Makati City where Mr. Fermin has his main office may not require him to Local
pow Prof
City and maintains a branch pay his professional tax as a lawyer. Mr. Fermin has the option of paying his Govern
er of essi
6 office in Pasig City. Mr. professional tax as a lawyer in Pasig City where he practices law or in Makati ment 2005
Local onal
Fermin pays his City where he maintains his principal office. (Sec. 139[b], Local Government Taxatio
Gove tax
professional tax as a CPA in Code) (UP; PALS) n
rnm
Makati City and his
ent
professional tax as a lawyer
Unit
in Pasig City. May Makati
s
City, where he has his main
office, require him to pay
 his professional tax as a
lawyer? Explain.

Mr. Fermin, a resident of

Quezon City, is a Certified
Public Accountant-Lawyer
engaged in the practice of
his two professions. He has Spec
his main office in Makati ific
City and maintains a branch taxin
office in Pasig City. Mr. No, the situs of the professional tax is the city where the professional g Situ
Local
Fermin pays his practices his profession or where he maintains his principal office in case he pow s of
Govern
professional tax as a CPA in practices his profession in several places. The local government of Quezon City er of tax
7 ment 2005
Makati City and his has no right to collect the professional tax from Mr. Fermin as the place of Local coll
Taxatio
professional tax as a lawyer residence of the taxpayer is not the proper situs in the collection of the Gove ecte
n
in Pasig City. May Quezon professional tax. (UP; PALS) rnm d
City, where he has his ent
residence and where he Unit
also practices his two s
professions, go after him
for the payment of his
professional tax as a CPA
and a lawyer? Explain.
 Taxable. Gross income includes "all income derived from whatever source" Sour
(Sec. 32[A], NIRC), which was interpreted as all income not expressly excluded ces
or exempted from the class of taxable income, irrespective of the voluntary or of
Explain briefly whether the Gros
involuntary action of the taxpayer in producing the income. Thus, the income Income inco
following items are taxable s
8 may proceed from a legal or illegal source such as from jueteng. Unlawful Taxatio me 2005
or non-taxable: Inco
gains, gambling winnings, etc. are subject to income tax. The tax code stands n subj
a) Income from jueteng; me
as an indifferent neutral party on the matter of where the income comes ect
from. (Commissioner of Internal Revenue v. Manning, G.R. No. L-28398, to
August 6, 1975) (UP; PALS) tax
Sour
ces
Explain briefly whether the of
Taxable. Sale exchange or other disposition of property to the government of Gros
following items are taxable Income inco
real property is taxable. It includes taking by the government through s
9 or non-taxable: Taxatio me 2005
condemnation proceedings. (Gonzales v. Court of Tax Appeals, G.R. No. L- Inco
b) Gain arising from n subj
14532, May 26, 1965) (UP; PALS) me
expropriation of property; ect
to
tax
Sour
ces
Explain briefly whether the Taxable only if the taxes were paid and claimed as deduction and which are of
Gros
following items are taxable subsequently refunded or credited. It shall be included as part of gross income Income inco
1 s
or non-taxable: in the year of the receipt to the extent of the income tax benefit of said Taxatio me 2005
0 c) Taxes paid and Inco
deduction. (Sec. 34[C][1], NIRC) Not taxable if the taxes refunded were not n subj
me
subsequently refunded; originally claimed as deductions. (UP; PALS) ect
to
tax
Ded
Explain briefly whether the Taxable under the TAX BENEFIT RULE. Recovery of bad debts previously ucti
Gros
following items are taxable allowed as deduction in the preceding years shall be included as part of the Income ons
1 s
or non-taxable: gross income in the year of recovery to the extent of the income tax benefit of Taxatio fro 2005
1 d) Recovery of bad debts Inco
said deduction. (Sec. 34[E][1], NIRC) This is sometimes referred as the n m
me
previously charged off; RECAPTURE RULES. (UP; PALS) Gro
ss
 Inco
me

Sour
ces
Explain briefly whether the of
Gros
following items are taxable Taxable. Since the car is used for personal purposes, it is considered as a Income inco
1 s
or non-taxable: capital asset hence the gain is considered income. (Sec. 32[A][3] and Sec. Taxatio me 2005
2 e) Gain on the sale of a car Inco
39[A][1], NIRC) (UP; PALS) n subj
me
used for personal purposes. ect
to
tax
Sour
State with reasons the tax
ces
treatment of the following
of
in the preparation of annual Not to be reported in the annual income tax returns because the proceeds of Gros
Income inco
1 income tax returns: the life insurance are excluded from gross income. Proceeds of Life insurance s
Taxatio me 2005
3 a) Proceeds of life policies paid to the heirs or beneficiaries upon the death of the insured is an
n
Inco
subj
insurance received by a exclusion from gross income. (Sec.32[B][l],NIRC) (UP; PALS) me
ect
child as irrevocable
to
beneficiary;
tax
Sour
The 13th month pay not exceeding P30,000.00 shall not be reported in the
ces
State with reasons the tax income tax return because it is excluded from gross income (Sec. 32[B][7], [e],
of
treatment of the following NIRC) The amount of the 13th month pay in excess of P30,000.00 shall be Gros
Income inco
1 in the preparation of annual reported in the annual income tax return. De minimis benefits which do not s
Taxatio me 2005
4 income tax returns: b) exceed the ceilings are excluded from gross income, and not to be considered Inco
n subj
13th month pay and de for determining the P30,000.00 ceiling hence not reportable in the annual me
ect
minimis benefits; income tax return. (Sec. 2.78.1[A][3], R.R. 2-98 as amended by Sec. 2.33 [C]
to
and further amended by R.R. No. 8-2000) (UP; PALS)
tax
 Sour
State with reasons the tax
ces
treatment of the following
of
in the preparation of annual
Dividends received by a domestic corporation from a domestic corporation Income Inco inco
1 income tax returns:
shall not be subject to tax (Sec. 27[D][4], NIRC), hence, excluded from the Taxatio me me 2005
5 c) Dividends received by a income tax return. (UP; PALS) n Tax subj
domestic corporation
ect
from: (i) another
to
domestic corporation;
tax
Sour
State with reasons the tax
ces
treatment of the following
of
in the preparation of annual Dividends received by a domestic corporation from a foreign corporation form
Income Inco inco
1 income tax returns: part of the gross income and are accordingly subject to net income tax, hence
Taxatio me me 2005
6 c) Dividends received by a included in the annual ITR (Sec. 42[A][2][b], NIRC), hence, must be included in
n Tax subj
domestic corporation the income tax return. (UP; PALS)
ect
from: (ii) a foreign
to
corporation;
tax
Sour
State with reasons the tax ces
treatment of the following of
Both items are excluded from the income tax return: Interest income from any
in the preparation of annual Income Inco inco
1 currency bank deposit is considered passive income from sources within the
income tax returns: d) Taxatio me me 2005
7 Interest on deposits Philippines and subject to final tax. Since it is subject final tax it is not to be
n Tax subj
included in the annual ITR. (Sec. 24[B][1], NIRC) (UP; PALS)
with (i) BPI Family ect
Bank; to
tax
Sour
State with reasons the tax
ces
treatment of the following
Income Inco of
1 in the preparation of annual
Taxatio me inco 2005
8 income tax returns: d)
n Tax me
Interest on deposits
subj
with (ii) a local offshore
ect
 banking unit of a foreign to
bank; tax

State with reasons the tax

Excl
treatment of the following
ude
in the preparation of annual Income realized from sale of capital assets is subject to the final withholding Income Inco
1 d in
income tax returns: e) tax at source and therefore excluded from the Income Tax Return (Sec. 24[C] Taxatio me 2005
9 the
Income realized from sale and [D], NIRC); (UP; PALS) n Tax
sylla
of (i) capital assets;
bus
and
Sour
State with reasons the tax ces
treatment of the following of
in the preparation of annual Income Inco inco
2 Income realized from sale of ordinary assets is part of Gross Income, included
income tax returns: e) Taxatio me me 2005
0 Income realized from sale in the Income Tax Return. (Sec. 32[A][3], NIRC) (UP; PALS)
n Tax subj
of (ii) ordinary ect
assets. to
tax
An international airline with
no landing rights in the
Yes. The income derived from the sales of tickets in the Philippines is
Philippines sold tickets in
considered taxable income of the international air carrier from Philippine
the Philippines for air Excl
sources. The source of income is the property, activity or service that
transportation. Is income ude
produced the income. The sale of tickets in the Philippines is the activity that Income Inco
2 derived from such sales of d in
produces the income. The absence of landing rights in the Philippines cannot Taxatio me 2005
1 tickets considered taxable alter the fact that revenues were derived from ticket sales within the n Tax
the
income of the said sylla
Philippines. (Commissioner of Internal Revenue v. Japan Air Lines, G.R. No.
international air carrier bus
60714, October 4, 1991 reiterating British Overseas Airways Corp., Air India
from Philippine sources
and American Airlines, Inc.) (UP; PALS)
under the Tax Code?
Explain.
 JR was a passenger of an
airline that crashed. He
survived the accident but
sustained serious physical
injuries which required
hospitalization for 3
months. Following
negotiations with the
airline and its insurer, an
agreement was reached
under the terms of which JR
All amounts received from the airline company are excluded from gross
was paid the following
income. Under Sec. 32(B)(4) of the NIRC, amounts of damages received,
amounts: P500,000.00 for Excl
whether by suit or agreement, on account of personal injuries or sickness are
his hospitalization; ude
excluded from gross income. Since the amounts received from the airline Income Inco
2 P250,000.00 as moral d in
company were received as damages by agreement on account of personal Taxatio me 2005
2 damages; and P300,000.00 injuries, all shall be excluded from JR's gross income. The amount of n Tax
the
for loss of income during sylla
P200,000.00, less the equivalent of not more than 10 days of vacation leave,
the period of his treatment bus
received by JR from his employer, is subject to income tax under Sec. 2.78.1
and recuperation. In
(a) (7) of R.R. No. 2-98. (UP; PALS)
addition, JR received from
his employer the amount of
P200,000.00 representing
the cash equivalent of his
earned vacation and sick
leaves.

Which, if any, of the

amounts he received are
subject to income tax?
Explain.
 Company A decides to close
its operations due to
continuing losses and to
terminate the services of its
employees. Under the
Labor Code, employees
who are separated from
service for such cause are
entitled to a minimum of
one-half month pay for
All of the benefits are not taxable, hence they are not subject to withholding
every year of service. Wit
tax under the Tax Code. Benefits received as a consequence of separation for Income Inco
2 Company A paid the hhol
any cause beyond the control of the employees such as closure of business are Taxatio me 2005
3 equivalent of one month excluded from gross income. (Sec. 32[B][6][b], NIRC in relation to Sec. 2[b][2], n Tax
ding
pay for every year of tax
R.R. 2-98) (UP; PALS)
service and the cash
equivalent of unused
vacation and sick leaves as
separation
benefits.

Are such benefits taxable

and subject to withholding
tax under the Tax Code?
Decide with reasons.
 Josel agreed to sell his The action of the parties constitutes tax evasion and exposes Josel to: (1)
condominium unit to Jess DEFICIENCY FINAL INCOME TAX on the sale of real property in the Philippines
for P2.5 Million. At the time classified as a capital asset. Under Sec. 24(D) of the NIRC, the final tax of six
of the sale, the property percent (6%) shall be based on the gross selling price of P2.5 Million or zonal
Taxa
had a zonal value of P2.0 value of P2.0 Million, whichever is higher, i.e., P2.5 Million; (2) FRAUD
tion
Million. Upon the advice of PENALTY amounting to 50% surcharge on the amount evaded (Sec. 248[B]
of
a tax consultant, the parties NIRC); and (3) DEFICIENCY INTEREST of 20% per annum on the deficiency.
resid
agreed to execute two (Sec. 249[A][B], NIRC) ALTERNATIVE ANSWER: There is tax evasion
ent
deeds of sale, one because of the concurrence of the following factors: 1) The payment of less
citiz Taxa
indicating the zonal value of than that known by the taxpayer to be legally due, or the non-payment of tax
ens, tion
P2.0 Million as the selling when it is shown that a tax is due. It is evident that the parties that the tax due
Income non- of
2 price and the other showing should be computed based on the valuation of P2.5 million and not P2.0
Taxatio resid capi 2005
4 the true selling price of P2.5 million; 2) An accompanying state of mind which is described as being "evil"
n ent tal
Million. The tax consultant on "bad faith," "willful," or "deliberate and not accidental." Despite the above
citiz gain
filed the capital gains tax knowledge, the parties deliberately misrepresented the true basis of the sale;
ens, s
return using the deed of and 3) A course of action or failure of action which is unlawful. This is shown
and
sale showing the zonal by the preparation of the two deeds of sale which showed different values.
resid
value of P2.0 Million as the (Commissioner of Internal Revenue v. The Estate ofBenigno P, Tbda, Jr., G.R.
ent
selling No. 147188, September 14, 2004) The tax evasion committed should result to
alien
price. the imposition of a 50% fraud surcharge on the amount evaded (Sec. 248[B],
s
NIRC) payment of the Deficiency Tax, and interest of 20% per annum on the
Discuss the tax implications deficiency. (Sec. 249[A][B], NIRC) The parties may likewise be subject to
and consequences of the criminal prosecution for willfully failing to pay the tax, as well as for filing a
action taken by the parties. false and fraudulent return. (Sees. 254, 255 and 257, NIRC) (UP; PALS)
Proc
edu
No, the approval of the court, sitting in probate, or as a settlement tribunal
Is the approval of the court, re
over the deceased is not a mandatory requirement in the collection of estate Estat
sitting as probate or estate for
taxes. There is nothing in the Tax Code, and in the pertinent remedial laws e
2 settlement court, required Estate Esta
that implies the necessity of the probate or estate settlement court's approval Tax 2005
5 in the enforcement and of the state's claim for estate taxes, before the same can be enforced and
Tax
Retu
te
collection of estate tax? Tax
collected. (Marcos v. Court of Appeals, G.R. No. 120880, June 5, 1997) (UP; rn
Explain. Settl
PALS)
eme
nt :
 Coll
ecti
on
of
Esta
te
Tax
Ralph Donald, an American
citizen, was a top executive
of a U.S. company in the
Philippines until he retired
in 1999. He came to like the
Philippines so much that
following his retirement, he
decided to spend the rest of
his life in the country. He
All of the properties enumerated except (g), the proceeds from life insurance, Wit
applied for and was granted
are included in the taxable gross estate in the Philippines. Ralph Donald is Com h
a permanent resident
considered a resident alien for tax purposes since he is an American Citizen posit resp
status the following year. In
and was a permanent resident of the Philippines at the time of his death. The ion ect
the spring of 2004, while
2 value of the gross estate of a resident alien decedent shall be determined by Estate of to
vacationing in Orlando, 2005
6 Florida, USA, he suffered a including the value at the time of his death of all property, real or personal, Tax Gros resi
tangible or intangible, wherever situated. (Sec. 85, NIRC) The other item, (g) s den
heart attack and died. At
proceeds from a life insurance policy, may also be included on the assumption Estat t
the time of his death, he
that it was Ralph Donald who took out the insurance upon his own life, e alie
left the following
payable upon his death to his estate. (Sec. 85[E], NIRC (UP; PALS) n
properties:
(a) bank deposits with
Citibank Makati and
Citibank Orlando,
Florida;
(b) a resthouse in
Orlando, Florida;
(c) a condominium unit in
Makati; (d)
 shares of stock in the
Philippine subsidiary of the
U.S. Company where he
worked; (e)
shares of stock in San
Miguel Corp. and PLDT; (f)
shares of stock in Disney
World in Florida; (g)
U.S. treasury bonds; and
(h) proceeds from a life
insurance policy issued by a
U.S. corporation.
Which of the foregoing
assets shall be included in
the taxable gross estate in
the Philippines? Explain.

Proc
edu
re
for
No, the approval of the court, sitting in probate, or as a settlement tribunal Esta
Is the approval of the court,
over the deceased is not a mandatory requirement in the collection of estate Estat te
sitting as probate or estate
taxes. There is nothing in the Tax Code, and in the pertinent remedial laws e Tax
2 settlement court, required Estate
that implies the necessity of the probate or estate settlement court's approval Tax Settl 2005
8 in the enforcement and of the state's claim for estate taxes, before the same can be enforced and
Tax
Retu eme
collection of estate tax?
collected. (Marcos v. Court of Appeals, G.R. No. 120880, June 5, 1997) (UP; rn nt :
Explain.
PALS) Coll
ecti
on
of
Esta
 te
Tax

Proc
edu
re
for
Esta
No, the approval of the court, sitting in probate, or as a settlement tribunal te
Is the approval of the court,
over the deceased is not a mandatory requirement in the collection of estate Estat Tax
sitting as probate or estate
taxes. There is nothing in the Tax Code, and in the pertinent remedial laws e Settl
3 settlement court, required Estate
that implies the necessity of the probate or estate settlement court's approval Tax eme 2005
1 in the enforcement and of the state's claim for estate taxes, before the same can be enforced and
Tax
Retu nt :
collection of estate tax?
collected. (Marcos v. Court of Appeals, G.R. No. 120880, June 5, 1997) (UP; rn Coll
Explain.
PALS) ecti
on
of
Esta
te
Tax
Proc
edu
re
No, the approval of the court, sitting in probate, or as a settlement tribunal
Is the approval of the court, for
over the deceased is not a mandatory requirement in the collection of estate Estat
sitting as probate or estate Esta
taxes. There is nothing in the Tax Code, and in the pertinent remedial laws e
3 settlement court, required Estate te
that implies the necessity of the probate or estate settlement court's approval Tax 2005
4 in the enforcement and of the state's claim for estate taxes, before the same can be enforced and
Tax
Retu
Tax
collection of estate tax? Settl
collected. (Marcos v. Court of Appeals, G.R. No. 120880, June 5, 1997) (UP; rn
Explain. eme
PALS)
nt :
Coll
ecti
 on
of
Esta
te
Tax
Yes, the deficiency tax assessment is a bar to a tax refund or credit. The
Taxpayer cannot be entitled to a refund and at the same time liable for a tax Taxp
Is a deficiency tax deficiency assessment for the same year. The deficiency assessment creates a ayer'
TAX
3 assessment a bar to a claim doubt as to the truth and accuracy of the Tax Return. Said Return cannot s Refu
REMEDI 2005
7 for tax refund or tax credit? therefore be the basis of the refund (Commissioner of Internal Revenue v.
ES
rem nd
Explain. Alltel [2002], citing Commissioner of Internal Revenue v. Court of Appeals, City edie
Trust Banking Corporation and Court of Tax Appeals, G.R. No. 106611, July 21, s
1994) (UP; PALS)
Com
pro
The following cases may still be compromised (R.R. 30-02 [2002]) because of
State and discuss briefly mise
the taxpayer's financial incapacity to pay the tax due or the assessment's Com
whether the following cases TAX and
3 doubtful validity: a) DELINQUENT ACCOUNTS may be compromised because pro
may be compromised or REMEDI Abat 2005
8 may not be compromised: there is no showing that there is a duly-approved schedule of installment mis
ES eme
payments; b) Cases under administrative protest, after issuance of the final e
a) Delinquent accounts; nt of
assessment notice to the taxpayer, which are still pending. (UP; PALS)
Taxe
s
State and discuss briefly
Com
whether the following cases
pro
may be compromised or
mise
may not be compromised: Com
TAX and
3 b) Cases under pro
REMEDI Abat 2005
9 administrative protest, ES eme
mis
after issuance of the final e
nt of
assessment notice to the
Taxe
taxpayer, which are still
s
pending;
 The following cases MAY NO LONGER BE COMPROMISED (R.R. 30-02 [2002])
because the taxpayer has not paid his taxes for reasons other than his Com
financial incapacity or the doubtful validity of the assessment: a) CRIMINAL pro
State and discuss briefly TAX FRAUD cases as may be determined by the Commissioner or his mise
Com
whether the following cases authorized agents may not be compromised; b) CRIMINAL VIOLATIONS TAX and
4 pro
may be compromised or ALREADY FILED IN COURT so that the taxpayer will not profit from his fraud REMEDI Abat 2005
0 may not be compromised: mis
which would encourage tax evasion; and c) Cases where final reports of ES eme
e
c) Criminal tax fraud cases; reinvestigation or reconsideration have been issued resulting in the reduction nt of
of the original assessment agreed to by the taxpayer when he signed the Taxe
required agreement form. The taxpayer is estopped from applying for a s
compromise. (UP; PALS)
Com
pro
State and discuss briefly
mise
whether the following cases Com
TAX and
4 may be compromised or pro
REMEDI Abat 2005
1 may not be compromised: mis
ES eme
d) Criminal violations e
nt of
already filed in court;
Taxe
s
State and discuss briefly
whether the following cases
may be compromised or Com
may not be compromised: pro
e) Cases where final reports mise
Com
of reinvestigation or TAX and
4 pro
reconsideration have been REMEDI Abat 2005
2 issued resulting in the mis
ES eme
e
reduction of the original nt of
assessment agreed to by Taxe
the taxpayer when he s
signed the required
agreement form.
 State the conditions
Taxp
required by the Tax Code Under Sec. 204(C), NIRC, the following conditions must be met: 1. There must
ayer'
before the Commissioner of be a written claim for refund filed by the taxpayer with the Commissioner. 2. TAX
4 s Refu
Internal Revenue could The claim for refund must be a categorical demand for reimbursement. 3. The REMEDI 2005
3 authorize the refund or rem nd
claim for refund must be filed within two (2) years from date of payment of ES
edie
credit of taxes erroneously the tax or penalty regardless of any supervening cause. (UP; PALS)
s
or illegally received.
Yes. A taxpayer is "any person subject to tax." Since, the withholding tax agent
Taxp
who is "required to deduct and withheld any tax" is made "personally liable
Does a withholding agent ayer'
for such tax" should the amount of the tax withheld be finally found to be less TAX
4 have the right to file an s Refu
than that required to be withheld by law, then he is a taxpayer. Thus, he has REMEDI 2005
4 application for tax refund? rem nd
sufficient legal interest to file an application for refund, of the amount he ES
Explain. edie
believes was illegally collected from him. (Commissioner of Internal Revenue
s
v. Procter & Gamble, G.R. No. 66838, December 2, 1991) (UP; PALS)
A taxpayer received a tax
deficiency assessment of
P1.2 Million from the BIR
demanding payment within
10 days, otherwise, it would
collect through summary
remedies. The taxpayer
requested for a Taxp
Yes, the final notice before seizure was in effect a denial of the taxpayer's
reconsideration stating the ayer'
request for reconsideration, not only was the notice the only response TAX Asse
4 grounds therefor. Instead s
received, its nature, content and tenor supports the theory that it was the REMEDI ssm 2005
5 of resolving the request for BIR's final act regarding the request for reconsideration. (CIR v. Isabela ES
rem
ent
reconsideration, the BIR edie
Cultural Corporation, G.R. No. 135210, July 11, 2001) (UP; PALS)
sent a Final Notice Before s
Seizure to the taxpayer.
May this action of the
Commissioner of Internal
Revenue be deemed a
denial of the request for
reconsideration of the
taxpayer to entitle him to
 appeal to the Court of Tax
Appeals?

Decide with reasons.

Danilo, who is engaged in

the trading business,
entrusted to his accountant
the preparation of his
income tax return and the
Danilo is liable for the deficiency tax as well as for the deficiency interest. He
payment of the tax due. Stat
should not be held liable for the fraud penalty because the accountant acted
The accountant filed a utor
beyond the limits of his authority. There is no showing in the problem that
falsified tax return by y Civil
Danilo signed the falsified return or that it was prepared under his direction. TAX
4 underdeclaring the sales offe Pen
On the other hand the accountant may be held criminally liable for violation of REMEDI 2005
6 and overstating the the Tax Code when he falsified the tax return by underdeclaring the sale and ES
nses altie
expense deductions by and s
overstating the expense deductions. If Danny's accountant is a Certified Public
Danilo. pena
Accountant, his certificate as a CPA shall automatically be revoked or
lties
cancelled upon conviction. (UP; PALS)
Is Danilo liable for the
deficiency tax and the
penalties thereon?
What is the liability, if any,
of the accountant? Discuss.
 In 1995, the BIR filed before
the Department of Justice
(DOJ) a criminal complaint
against a corporation and
its officers for alleged
evasion of taxes. The
complaint was supported
by a sworn statement of
the BIR examiners showing The DOJ is correct in ruling that an assessment of the tax deficiency of the
the computation of the tax corporation is not a precondition to the filing of a criminal complaint. There is
liabilities of the erring no need for an sirdondee@gmail.com 53 of 73 assessment so long as there is
taxpayer. The corporation a prima facie showing of violation of the provisions of the Tax Code. After all, a
filed a motion to dismiss criminal charge is instituted not to demand payment, but to penalize the tax
the criminal complaint on payer for violation of the Tax Code. (Commissioner of Internal Revenue v.
Taxp
the ground that there has Pascor Realty and Development Corporation, G.R. No. 128315, June 29, 1999)
ayer'
been, as yet, no assessment Furthermore, there is nothing in the problem that shows that the BIR in filing TAX Asse
4 s
of its tax liability; hence, the case is also interested in collecting the tax deficiency. However, it is in REMEDI ssm 2005
7 the criminal complaint was rem
error when it ruled that the joint affidavit of the BIR examiners may be ES ent
edie
premature. The DOJ denied considered as an assessment of the tax liability of the corporation. The joint
s
the motion on the ground affidavit showing the computation of the tax liabilities of the erring taxpayer is
that an assessment of the not a tax assessment because it was not sent to the taxpayer, and does not
tax deficiency of the demand payment of the tax within a certain period of time. An assessment is
corporation is not a deemed made only when the BIR releases, mails or sends such notice to the
precondition to the filing of taxpayer. (Commissioner of Internal Revenue v. Pascor Realty and
a criminal complaint and Development Corporation, G.R. No. 128315, June 29, 1999) (UP; PALS)
that in any event, the joint
affidavit of the BIR
examiners may be
considered as an
assessment of the tax
liability of the
corporation.
Is
 the ruling of the DOJ
correct? Explain.

Yes, the legislative body may enact laws even in the absence of a
constitutional provision because the power to tax is inherent in the
government and not merely a constitutional grant. The power of taxation is an
essential and inherent attribute of sovereignty belonging as a matter of right
to every independent government without being expressly granted by the
Describe the power of people. (Pepsi-Cola Bottling Company of the Philippines, Inc. v. Municipality of
taxation. May a legislative Tanauan, Leyte, G.R. No. L-31156, February 27,1976) Taxation is General Pow
Natu
body enact laws to raise the inherent power of a State to collect enforced proportional contribution to Principl er
4 re of
revenues in the absence of support the expenses of government. Taxation is the power vested in the es of of 2005
8 Taxa
a constitutional provision legislature to impose burdens or charges upon persons and property in order Taxatio taxa
tion
granting said body the to raise revenue for public purposes. The power to tax is so unlimited in force n tion
power to tax? Explain. and so searching in extent that courts scarcely venture to declare it is subject
to any restrictions whatever, except such as rest in the discretion of the
authority which exercises it. (Tio v. Videogram Regulatory Board, G.R. No. L-
75697, June 18, 1987) So potent is the power to tax that it was once opined
that "the power to tax involves the power to destroy." (C.J. Marshall in
McCulloch v. Maryland, 4 Wheat, 316 4 L. Ed. 579, 607) (UP; PALS)
 The Roman Catholic Church
owns a 2-hectare lot in a
town in Tarlac province. No. The Church cannot claim tax exemption on the entire land. Only the
The southern side and southern side and middle part that are occupied by the Church and a convent
middle part are occupied by and the eastern side occupied by a school run by the Church itself are exempt,
the Church and a convent, because such parts of the 2-hectare lot are actually, directly and exclusively
the eastern side by a school used for religious and educational purposes. (Sec. 28[3], Art. VI, 1987 Exe
run by the Church itself, the Constitution; Sec. 234, Local Government Code) The southeastern side General Doct mpt
southeastern side by some occupied by some commercial establishment is not tax exempt. If real principl rines ion
4
commercial establishments, property is used for one or more commercial purposes, it is not exclusively es of in fro 2005
9 while the rest of the used for the exempted purpose but is subject to taxation. 'Solely' is taxatio Taxa m
property, in particular the synonymous with 'exclusively.' (Lung Center of the Philippines v. Quezon City, n tion taxa
northwestern side, is idle or G.R. No. 144104, June 29, 2004) The property must be exclusively (solely) used tion
unoccupied. for religious or educational purposes. Of course, it is apparent that the
northwestern side, which is idle or unoccupied is not "actually, directly and
May the Church claim tax exclusively" used for religious or educational purposes, hence not exempt
exemption on the entire from taxation. (UP; PALS)
land?
Decide with reasons.
An alien employee of the
Asian Development Bank
(ADB) who is retiring soon
has offered to sell his car to
you which he imported tax- The sales transaction is subject to value added tax (VAT) under Sec. 107(B) of Exe
free for his personal use. the NIRC, although this provision is expressly excluded from the coverage of General Doct mpt
The privilege of exemption the 2005 bar exam. The proceeds from the sale are subject to income tax. The principl rines ion
5
from tax is granted to car is considered a capital asset of the retiring alien employee because he is es of in fro 2005
0 qualified personal use not engaged in the business of buying and selling cars. He therefore derived taxatio Taxa m
under the ADB Charter income, which should be reported in his income tax return. (Sees. 32 and 39, n tion taxa
which is recognized by the NIRC) (UP; PALS) tion
tax
authorities.

If you decide to purchase

 the car, is the sale subject
to tax? Explain.

No, taxes cannot be the subject of set-off or compensation for the following
reasons: 1) The lifeblood theory requires that there should be no unnecessary
impediments to the collection of taxes to make available to the government
the wherewithal to meet its legitimate objectives; and 2) The payment of
taxes is not a contractual obligation but arises out of a duty to pay, and in
respect of the positive acts of government, regarding the making and
enforcing of taxes, the personal consent of the individual taxpayer is not General Doct
May taxes be the subject of required. (Republic v. Mambulao Lumber Co., G.R. No. L-17725, February 28, Principl rines
5 Set-
set-off or compensation? 1962; Caltex v. Commission on Audit, G.R. No. 92585, May 8, 1992; and Philex es of in 2005
1 Explain. off
v. Commissioner of Internal Revenue, G.R. No. 125704, August 28, 1998) Taxatio Taxa
However, there is a possibility that set-off may arise, if the claims against the n tion
government have been recognized and an amount has already been
appropriated for that purpose. Where both claims have already become
overdue and demandable as well as fully liquidated. Compensation takes place
by operation of law under Art. 1200 in relation to Articles 1279 and 1290 of
the New Civil Code. (Domingo v. Garlitos, G.R. No. L-18994, June 29, 1963)
(UP; PALS)
 The Collector of Customs
issued an assessment for
unpaid customs duties and
taxes on the importation of
your client in the amount of
P980,000.00. Where will
you file your case to protect
your client's right? Choose
1. Protest with the Collector of Customs (Sec. 2308, TCC) 2. Appeal to the Tariff
the correct courts/agencies, Rem Tax
Commissioner of Customs (Sec. 2313, TCC). 3. Appeal to the CTA (RA 9282) 4. and
1 observing their proper edie pay 2006
Petition for Review on Certiorari Supreme Court (Rule 45 of the 1997 Rules of Custom
hierarchy. s er
Civil Procedure (RA 9282). (UP; PALS) s
1. Court of Tax Appeals
2. Collector of Customs
3. Commissioner of
Customs
4. Regional Trial Court
5. Metropolitan Trial Court
6. Court of Appeals
7. Supreme Court
The following properties are exempt from the real property tax (Section 234,
Local Government Code): (1) Real property owned by the REPUBLIC OF THE
PHILIPPINES or any of its political subdivisions except when the beneficial use Exe
thereof has been granted for consideration or otherwise to a taxable person; mpt
Impo
(2) CHARITABLE INSTITUTIONS, churches, parsonages or convents appurtenant ion
Real sitio
thereto, mosques, non-profit or religious cemeteries, and all lands, buildings, fro
What properties are Propert n of
and improvements actually, directly and exclusively used for religious, m
2 exempt from the real y Real 2006
charitable or educational purposes; (3) All machineries and equipment that real
property tax? Taxatio Prop
are actually, directly and exclusively used by LOCAL WATER UTILITIES and pro
n erty
government-owned or controlled corporations engaged in the supply and pert
Tax
distribution of water and/or generation and transmission of electric power; (4) y
All real property owned by duly REGISTERED COOPERATIVES as provided for tax
under R.A. 6938; and (5) Machinery and equipment used for POLLUTION
CONTROL and ENVIRONMENTAL PROTECTION. (UP; PALS)
 Quezon City published on
January 30, 2006 a list of
delinquent real property
taxpayers in 2 newspapers
of general circulation and
posted this in the main
lobby of the City Hall. The
notice requires all owners
of real properties in the list Issu
to pay the real property tax anc
due within 30 days from the e of
date of publication, noti
otherwise the properties ce
listed shall be sold at public of
I will resolve the issue in favor of Joachin. In auction sales of property for tax Colle
auction. deli
delinquency, notice to delinquent landowners and to the public in general is Real ction
Joachin is one of those nqu
an essential and indispensable requirement of law, the non-fulfillment of Propert of
named in the list. He enc
3 which vitiates the same (Tiongco v. Phil. Veterans Bank, G.R. No. 82782, Aug. y real 2006
purchased a real property y for
5, 1992). The failure to give notice to the right person i.e., the real owner, will Taxatio prop
in 1996 but failed to real
render an auction sale void (Tan v. Bantegui, G.R. No, 154027, October 24, n erty
register the document of pro
2005; City Treasurer of Q.C. v. CA, G.R. No. 120974, Dec. 22, 1997). (UP; PALS) tax
sale with the Register of pert
Deeds and secure a new y
real property tax tax
declaration in his name. He pay
alleged that the auction men
sale of his property is void t
for lack of due process
considering that the City
Treasurer did not send him
personal notice. For his
part, the City Treasurer
maintains that the
publication and posting of
notice are sufficient
compliance with the
requirements of the law.If
you were the judge, how
will you resolve the issue?
 Quezon City published on
January 30, 2006 a list of
delinquent real property
taxpayers in 2 newspapers
of general circulation and
posted this in the main
lobby of the City Hall. The
notice requires all owners
of real properties in the list
to pay the real property tax
due within 30 days from the
date of publication,
otherwise the properties noti
listed shall be sold at public ce
Colle
auction. of
Real ction
Joachin is one of those Yes. The law requires that a notice of the auction sale must be properly sent to time
Propert of
named in the list. He Joachin and not merely through publication (Tan v. Bantegui, G.R. No, 154027, for
4 y real 2006
purchased a real property October 24,2005; Estate of Mercedes Jacob v. CA, G.R. No. 120435, Dec. 22, coll
Taxatio prop
in 1996 but failed to 1997). (UP; PALS) ecti
n erty
register the document of on
tax
sale with the Register of of
Deeds and secure a new tax
real property tax
declaration in his name. He
alleged that the auction
sale of his property is void
for lack of due process
considering that the City
Treasurer did not send him
personal notice. For his
part, the City Treasurer
maintains that the
publication and posting of
notice are sufficient
 compliance with the
requirements of the
law.Assuming Joachin is a
registered owner, will your
answer be the same?

Congress enacts a law

imposing a 5% tax on the
gross receipts of common
carriers. The law does not
define the term "gross Yes. The term "Gross Receipts" is broad enough to include income
receipts". Express constructively received by the taxpayer. The amount withheld is paid to the
Gros
Transport, Inc., a bus government on its behalf, in satisfaction of withholding taxes. The fact that it Income Defi
s
5 company plying the Manila- did not actually receive the amount does not alter the fact that it is remitted Taxatio nitio 2006
Inco
Baguio route, has time in satisfaction of its tax obligations. Since the income withheld is an income n n
me
deposits with ABC Bank. In owned by Express Transport, the same forms part of its gross receipts (CIR v.
2005, Express Transport Solidbank Corp., G.R. No. 148191, November 25, 2003). (UP; PALS)
earned P1 Million interest,
after deducting the 20%
final withholding tax from
its time deposits with the
 bank. The BIR wants to
collect a 5% gross receipts
tax on the interest income
of Express Transport
without deducting the 20%
final withholding tax. Is the
BIR correct? Explain.

Charlie, a widower, has two

sons by his previous
Ded
marriage. Charlie lives with
ucti
Jane who is legally married
Charlie can claim the personal exemption of a Head of a Family or P25,000.00 ons
to Mario. They have a child Gros
provided that, at least one of his minor and not gainfully employed children is Income fro
named Jill. The children are s
6 unmarried and living with and dependent upon him for chief support (Tax Taxatio m 2006
all minors and not gainfully Inco
Reform Act, RA 8424, Chapter VII, Section 35[A]; BIR Revenue Regulation 02- n Gro
employed. me
98). (UP; PALS) ss
Inco
How much personal
me
exemption can Charlie
claim? Explain.
Charlie, a widower, has two
Ded
sons by his previous
ucti
marriage. Charlie lives with His children from his previous marriage who are legitimate children and his
ons
Jane who is legally married illegitimate child with Jane will all entitle him to additional personal Gros
Income fro
to Mario. They have a child exemption of P8,000.00 for each dependent, if apart from being minor and s
7 Taxatio m 2006
named Jill. The children are not gainfully employed, they are unmarried, living with and dependent upon Inco
n Gro
all minors and not gainfully Charlie for their chief support (Tax Reform Act, RA8424, Chapter VH, Section me
ss
employed.How much 35(A); BIR Revenue Regulation 02-98 (UP; PALS)
Inco
additional exemption can
me
Charlie claim? Explain.
 Gold and Silver Corporation
gave extra 14th month
bonus to all its officials and
employees in the total
amount of P75 Million.
When it filed its corporate
income tax return the I will disallow the expense. A bonus is ordinary and necessary where said
following year, the expenditure is (1) appropriate and helpful in the development of the
corporation declared a net taxpayers business (Martens, Law of Federal Income Taxation, Volume IV, p.
operating loss. When the 315) and (2) is normal in relation to the business of the taxpayer and the Ded
income tax return of the surrounding circumstances (p. 316, Ibid). To determine the reasonableness of ucti
corporation was reviewed the bonus it must be commensurate with services performed by the officials on
Gros
by the BIR the following and employees. Other factors to consider are whether the payment was made Income fro
s
8 year, it disallowed as item in good faith; the character of the taxpayer's business; the volume and Taxatio m 2006
Inco
of deduction the P75 amount of its net earnings; its locality; the type and extent of the services n Gro
me
Million bonus the rendered; the salary policy of the corporation; the size of the particular ss
corporation gave its business; the employees' qualification and contributions to the business Inco
officials and employees on venture; and general economic conditions (Atlas Mining v. CIR, G.R. No. L- me
the ground of 26911, January 27, 1981). However, since the business suffers from a net
unreasonableness. The operating loss, I will rule that the bonus is an unreasonable expense. (UP;
corporation claimed that PALS)
the bonus is an ordinary
and necessary expense that
should be allowed.
If you were the BIR
Commissioner, how will you
resolve the issue?
Vanishing deduction is
Ded Vani
availed of by taxpayers to:
uctio shin
1. correct his accounting (D) reduce his gross estate. Vanishing deduction or prop- erty previously taxed
Estate ns g
9 records to reflect the actual is one of the items of deduction allowed in computing the net estate of a 2006
Tax from Ded
deductions made 2. decedent (Section 86[A][2] and 86[B][2], NIRC). (UP; PALS)
estat ucti
reduce his gross income
e ons
3. reduce his output value-
 added tax liability
4. reduce his gross estate
Choose the correct answer.
Explain.

Vanishing deduction is
availed of by taxpayers to:
1. correct his accounting
Ded Vani
records to reflect the actual
uctio shin
deductions made 2. (D) reduce his gross estate. Vanishing deduction or prop- erty previously taxed
1 Estate ns g
reduce his gross income is one of the items of deduction allowed in computing the net estate of a 2006
0 Tax from Ded
3. reduce his output value- decedent (Section 86[A][2] and 86[B][2], NIRC). (UP; PALS)
estat ucti
added tax liability
e ons
4. reduce his gross estate
Choose the correct answer.
Explain.
Vanishing deduction is
availed of by taxpayers to:
1. correct his accounting
Ded Vani
records to reflect the actual
uctio shin
deductions made 2. (D) reduce his gross estate. Vanishing deduction or prop- erty previously taxed
1 Estate ns g
reduce his gross income is one of the items of deduction allowed in computing the net estate of a 2006
1 Tax from Ded
3. reduce his output value- decedent (Section 86[A][2] and 86[B][2], NIRC). (UP; PALS)
estat ucti
added tax liability 4.
e ons
reduce his gross estate
Choose the correct answer.
Explain.
 Vanishing deduction is
availed of by taxpayers to:
1. correct his accounting
Ded Vani
records to reflect the actual
uctio shin
deductions made 2. (D) reduce his gross estate. Vanishing deduction or prop- erty previously taxed
1 Estate ns g
reduce his gross income is one of the items of deduction allowed in computing the net estate of a 2006
2 3. reduce his output value- Tax from Ded
decedent (Section 86[A][2] and 86[B][2], NIRC). (UP; PALS)
estat ucti
added tax liability
e ons
4. reduce his gross estate
Choose the correct answer.
Explain.

Congress enacts a law

granting grade school and
high school students a 10%
discount on all school-
prescribed textbooks
purchased from any No, the bookstore cannot claim from the BIR a tax refund in lieu of tax credit. Taxp
bookstore. The law allows There is nothing in the law that grants a refund when the bookstore has no tax ayer'
TAX
1 bookstores to claim in full liabil- ity against which the tax credit can be used (CIR v. Central Luzon Drug, s Refu
REMEDI 2006
3 the discount as a tax credit. G.R. No 159647, April 15, 2005). A tax credit is in the nature of a tax
ES
rem nd
exemption and in case of doubt, the doubt should be resolved in strictissimi edie
If in a taxable year a juris against the claimant. (UP; PALS) s
bookstore has no tax due
on which to apply the tax
credits, can the bookstore
claim from the BIR a tax
refund in lieu of tax credit?
Explain.
 Congress enacts a law
granting grade school and
high school students a 10%
discount on all school-
prescribed textbooks
purchased from any
bookstore. The law allows
bookstores to claim in full
the discount as a tax credit.
A bookstore, closing its business due to losses, cannot claim reimbursement of Taxp
the discount from the government. If the business continues to operate at a ayer'
If a bookstore closes its TAX
1 loss and no other taxes are due, thus compelling it to close shop, the credit s Refu
business due to losses REMEDI 2006
4 without being able to can never be applied and will be lost altogether (CIR v. Central Luzon Drug, rem nd
ES
G.R. No. 159647, April 15, 2005). The grant of the discount to the taxpayer is a edie
recoup the discount, can it
mere privilege and can be revoked anytime. (UP; PALS) s
claim reimbursement of the
discount from the
government on the ground
that without such
reimbursement, the law
constitutes taking of private
property for public use
without just compensation?
Explain.
On June 1, 2003, Global
The denial for the request for reconsideration is the final decision of the CIR.. I
Bank received a final notice
would advise Global Bank to appeal the denial to the Court of Tax Appeals
of assessment from the BIR
(CTA) within 30 days from receipt. I will further advise the bank to file a Taxp
for deficiency documentary
motion for injunction with the Court of Tax Appeals to enjoin the ayer'
stamp tax in the amount of TAX Asse
1 Commissioner from enforcing the assessment pending resolution of the s
P5 Million. On June 30, REMEDI ssm 2006
5 appeal. While an appeal to the CTA will not suspend the payment, levy, rem
2003, Global Bank filed a ES ent
distraint, and/or sale of any property of the taxpayer for the satisfaction of its edie
request for reconsideration
tax liability, the CTA is authorized to give injunctive relief if the enforcement s
with the Commissioner of
would jeopardize the interest of the taxpayer, as in this case, where the
Internal Revenue. The
assessment has not become final (Lascona Land Co. v, CIR, CTA Case No. 5777,
Commissioner denied the
 request for reconsideration January 4, 2000; See also Revised CTA Rules, approved by the Supreme Court
only on May 30, 2006, at on December 15, 2005).
the same time serving on
Global Bank a warrant of
distraint to collect the
deficiency tax. If you were
its counsel, what will be
your advice to the bank?
Explain.

The Commissioner of
Internal Revenue issued an
assessment for deficiency
As Counsel, I shall move to cancel the Assessment because of prescription. The Taxp
income tax for taxable year
three (3) year period of assessment for the Income Tax Returns of 2000 starts ayer'
2000 last July 31, 2006 in TAX Asse
1 on April 15, 2001 and ends on April 16, 2004. The assessment of July 31, 2006 s
the amount of P10 Million REMEDI ssm 2006
6 is beyond the three (3) year prescriptive period and can no longer have any rem
inclusive of surcharge and ES ent
legal, binding effect (Tax Reform Act, Title VIII, Chapter I, Section 203 [1997]). edie
interests. If the delinquent
(UP; PALS) s
taxpayer is your client,
what steps will you take?
What is your defense?
Gerry was being prosecuted
by the BIR for failure to pay
his income tax liability for
Calendar Year 1999 despite
No. The trial court can exercise jurisdiction. Prescription of a criminal action
several demands by the BIR Judic Judi
begins to run from the day of the violation of the law. The crime was
in 2002. The Information Judicial ial cial
1 committed when Gerry willfully refused to pay despite repeated demands in
was filed with the RTC only Remedi proc proc 2006
7 2002. Since the information was filed in June 2006, the criminal case was
last June 2006. Gerry filed a es edur edu
instituted within the five-year period required by law (Tupaz v. Ulep, G.R. No.
motion to quash the es res
127777, October 1, 1999; Section 281, NIRC). (UP; PALS)
Information on the ground
of prescription, the
Information having beer.
filed beyond the 5-year
 reglementary period.
If you were the judge, will
you dismiss the
Information? Why?

Esca
pe
fro
Tax Pyramiding is the imposition of a tax upon another tax. It has no basis in General Doct m
fact or in law (People v. Sandiganbayan, G.R. No. 152532, August 16, 2005). principl rines taxa
1 What is tax pyramiding?
There is also tax pyramiding when sales taxes are incorrectly applied to goods es of in tion 2006
8 What is its basis in law? several times from production to final sale, thus, shifting the tax burden to the taxatio Taxa :
ultimate consumer. (UP; PALS) n tion Tax
pyra
midi
ng
1. The Constitution
provides "charitable
institutions, churches,
parsonages or convents
appurtenant thereto, Exe
mosques, and non- profit The provision exemptions charitable institutions and religious institutions General Doct mpt
cemeteries and all lands, from (d) REAL PROPERTY TAXES only. The exemption is only for taxes assessed principl rines ion
1
buildings, and as property taxes, as distinguished from excise taxes (CIR v. CA, CTA & YMCA, es of in fro 2006
9
improvements actually, G.R. No. 124043, October 14, 1998; Lladoc v. Commissioner of Internal taxatio Taxa m
directly and exclusively Revenue, L-19201, June 16,1965). (UP; PALS) n tion taxa
used for religious, tion
charitable or educational
purposes shall be exempt
from taxation." This
provision exempts
 charitable institutions and
religious institutions from
what kind of taxes? Choose
the best answer. Explain.
a. from all kinds of taxes,
i.e., income, VAT, customs
duties, local taxes and real
property tax
b. from income tax only
c. from value-added tax
only d.
from real property tax only
e. from capital gains tax
only
Congress enacts a law
granting grade school and
high school students a 10%
discount on all school-
prescribed textbooks
No. Tax credit which reduces the tax liability is different from a tax deduction
purchased from any General Doct
which merely reduces the tax base. Since the law allowed the bookstores to Pow
bookstore. The law allows principl rines
2 claim in full the discount as a tax credit, the BIR is not allowed to expand or er
bookstores to claim in full es of in 2006
0 the discount as a tax credit. contract the legislative mandate (CIR v. Bicolandia Drug Corp., G.R. No. of
taxatio Taxa
148083, July 21, 2006; CIR v. Central Luzon Drug Corp., G.R. No. 159647, April BIR
n tion
15, 2005). (UP; PALS)
Can the BIR require the
bookstores to deduct the
amount of the discount
from their gross income?
Explain.
 Mr. Abraham Eugenio, a
pawnshop operator, after
having been required by
the Revenue District Officer
to pay value added tax Yes. The RMO is in reality a ruling of the Commissioner in implementing the
General Doct
pursuant to a Revenue provisions of the Tax Code on the taxability of pawnshops. Jurisdiction to Pow
principl rines
2 Memorandum Order (RMO) review rulings of the Commissioner is lodged with the Court of Tax Appeals er
es of in 2006
1 of the Commission.er of and not with the Regional Trial Court (CIR v. Josefina Leal, G.R. No. 113459, of
taxatio Taxa
Internal Revenue, filed with November 18, 2002; Tax Reform Act, RA 8424, Title I, Sec. 4 [1997]). (UP; BIR
n tion
the Regional Trial Court an PALS)
action questioning the
validity of the RMO.
If you were the judge, will
you dismiss the case?
Levy
ing;
Asse
ssm
The aspects of taxation are: (1) LEVYING — the act of the legislature in General
Stag ent
Enumerate the 3 stages or choosing the persons, properties, rights or privileges to be subjected to principl
2 es of and
aspects of taxation. Explain taxation. (2) ASSESSMENT and COLLECTION — This is the act of executing the es of 2006
2 each. Taxa Coll
law through the administrative agencies of government. (3) PAYMENT — the taxatio
tion ecti
act of the taxpayer in settling his tax obligations. (UP; PALS) n
on;
Pay
men
t
Acc
DIRECT TAXES are demanded from the very person who should pay the tax
ordi
and which he can not shift to another. An INDIRECT TAX is demanded from General
Kind ng
Distinguish "direct taxes" one person with the expectation that he can shift the burden to someone principl
2 s of to
from "Indirect taxes". Give else, not as a tax but as part of the purchase price. Examples of direct taxes es of 2006
3 examples. taxe bur
are the income tax, the estate tax and the donor's tax. Examples of indirect taxatio
s den
taxes are the value-added tax, the percentage tax and the excise tax on n
or
exciseable articles. (UP; PALS)
inci
 den
ce

The taxing power of the provinces, municipalities and cities is directly

conferred by the Constitution by giving them the authority to create their own
sources of revenue. The local government units do not exercise the power to
tax as an inherent power or by a valid delegation of the power by the
Congress, but pursuant to a direct authority conferred by the Constitution.
(Mactan Cebu International AirportAuthority v. Marcos, 261 SCRA 667[1996];
NPC v. City of Cabanatuan, 401SCRA 259 [2003]). The local government
units exercise the power to tax by levying taxes, fees and charges consistent
pow
with the basic policy of local autonomy, and to assess and collect all these
er
taxes, fees and charges which will exclusively accrue to them. The local
to
government units are authorized to pass tax ordinances (levy) and to pursue
crea
What is the nature of the actions for the assessment and collection of the taxes imposed in the said
te
taxing power of the ordinances. (Section 129, and132, Local Government Code). (UP; PALS) Local Local
reve
provinces, municipalities Govern Taxi
nue
1 and cities? How will the NOTE: Local Government Code Provisions ment ng 2007
s
local government units be Sec. 129 Power to Create Sources of Revenue. - Eah Local government unit Taxatio auth
exer
able to exercise their shall exercise its power to create its own sources of revenue and to levy taxes, n ority
cise
taxing powers? fees, and charges subject to the provisions herein, consistent with the basic
thro
policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively
ugh
to the local government units.
LGU
s
See also the ff. sections
Sec. 130 Fundamental Principles (like taxes, fees, charges and other
impositions shall not be unjust, excessive, oppressive, or confiscatory);

Sec. 133 Common Limitations on the Taxing Powers of Local Government

Units. (i.e. the taxing powers of LGU shall NOT exyend to the levy of the
following: [o] Taxes, fees or charges of any kind on the National Government,
its agencies and instrumentalities, and local government units.)
 The Local Government
Code took effect on January
1, 1992. PLDT's legislative
franchise was granted
sometime before 1992. Its
franchise provides that
PLDT will only pay 3%
The ordinance is valid. The Local Government Code explicitly authorizes
franchise tax in lieu of all
provincial governments, not withstanding any law or other special law, to
taxes. The legislative
impose a tax on business enjoying a franchise at the rate of 50% of 1% based
franchises of Smart and
on the gross annual receipts during the preceding year within the province.
Globe Telecoms were
(Section 137,LGC). PLDT is liable to the franchise tax levied by the province of Spec
granted in 1998. Their
Zamboanga del Norte. The tax exemption privileges on franchises granted ific
legislative franchises state
before the passage of the Local Government Code are effectively repealed by taxin
that they will pay only 5%
the latter law. (PLDT v. City of Davao, 363 SCRA 522 [2001]).Note: Sec. 193 g
franchise tax in lieu of all Local
LGC- Withdrawal of Tax Exemption Privileges- Unless otherwise provided in pow Fran
taxes. The Province of Govern
this Code, tax exemptions or incentives granted to, or presently enjoyed by all er of chis
2 Zamboanga del Norte ment 2007
persons, whether natural or juridicall, INCLUDING government owned or Local e
passed an ordinance in Taxatio
controlled corporations, EXCEPT local water districts, cooperatives duly Gove tax
1997 that imposes a local n
registered under RA No. 6938, non-stock and non-profit hospitalas and rnm
franchise tax on all
educational institutions, are hereby withdrawn upon the effectivity of this ent
telecommunication
code.Smart and Globe, however, are not liable to the franchise tax imposed Unit
companies operating within
under the provincial ordinance. The legislative franchises of Smart and Globe s
the province. The tax is 50%
were granted in 1998, long after the Local Government Code took effect .
of 1% of the gross annual
Congress is deemed to have been aware of the provisions of the earlier law,
receipts of the preceding
when it granted the exemption. Accordingly, the latest will of the legislature
calendar year based on the
to grant tax exemption must be respected. (UP; PALS)
incoming receipts, or
receipts realized, within
territorial jurisdiction. Is the
ordinance valid? Are PLDT,
Smart and Globe liable to
pay franchise taxes?
Reason briefly.
 ABC Corporation sold a real
property in Malolos,
Bulacan to XYZ Corporation.
The property has been
classified as residential and
with a zonal valuation of
P1, 000 per square meter.
The capital gains tax was
paid based on the zonal
value. The Revenue District
Officer (RDO), however,
refused to issue the
Certificate Authorizing
No. The RDO has no authority to use afair market value other than
Registration for the reason Taxa
thatprescribed in the Tax Code. The fairmarket value prescribed for Taxa
that based on his ocular tion
thecomputation of any internal revenue taxshall be, whichever is the higher tion
inspection the property of
of: (1)The fair market value as determined bythe Commissioner (referred to as Income of
should have a higher zonal dom
3 zonalvalue); or (2) the fair market value asshown in the schedule of values of Taxatio capi 2007
valuation determined by estic
theprovincial and city assessors (FMV pertax declaration). (Section 6(E), n tal
the Commissioner of corp
NIRC).The use of the fair market value appearing in a nearby bank's valuation gain
Internal Revenue because orati
list, therefore, is not allowed forpurposes of computing internal revenue s
the area is already a ons
taxes. (UP; PALS)
commercial area.
Accordingly, the RDO
wanted to make a
recomputation of the taxes
due by using the fair market
value appearing in a nearby
bank's valuation list which
is practically double the
existing zonal value. The
RDO also wanted to assess
a donor's tax on the
difference between the
selling price based on the
zonal value and the fair
market value appearing in a
nearby bank's valuation
list.Does the RDO have the
authority or discretion to
unilaterally use the fair
market value as the basis
for determining the capital
gains tax and not the zonal
value as determined by the
Commissioner of Internal
Revenue? Reason briefly.
 ABC Corporation sold a real
property in Malolos,
Bulacan to XYZ Corporation.
The property has been
classified as residential and
with a zonal valuation of
P1, 000 per square meter.
The capital gains tax was
paid based on the zonal
value. The Revenue District
Officer (RDO), however,
refused to issue the
Certificate Authorizing
Registration for the reason Taxa
Taxa
that based on his ocular tion
tion
inspection the property No. The difference in the supposedtaxable value cannot be legally subject of
Income of
should have a higher zonal tothe donor’s tax, because the use of a fair market value other than that dom
4 Taxatio capi 2007
valuation determined by prescribedby the Tax Code is not allowed forcomputing any internal revenue estic
n tal
the Commissioner of tax.(Section 6(E), NIRC). (UP; PALS) corp
gain
Internal Revenue because orati
s
the area is already a ons
commercial area.
Accordingly, the RDO
wanted to make a
recomputation of the taxes
due by using the fair market
value appearing in a nearby
bank's valuation list which
is practically double the
existing zonal value. The
RDO also wanted to assess
a donor's tax on the
difference between the
selling price based on the
 zonal value and the fair
market value appearing in a
nearby bank's valuation
list.Should the difference in
the supposed taxable value
be legally subject to
donor's tax? Reason
briefly.

Z is a Filipino immigrant
living in the United States
for more than 10 years. He
is retired and he came back Excl
to the Philippines as a usio
balikbayan. Every time he ns
The pension is not taxable. The lawprovides that pensions received byresident Gros
comes to the Philippines, Income fro
or nonresident citizens of thePhilippines from foreign governmentsagencies s
5 he stays here for about a Taxatio m 2007
and other institutions, privateor public, are excluded from grossincome. Inco
month. He regularly n gros
(Section 32 (B)(6)(c), NIRC). me
receives a pension from his s
former employer in the inco
United States, amounting me
to US$1, 000 a month.
While in the Philippines,
with his pension pay from
 his former employer, he
purchased three
condominium units in
Makati which he is renting
out for P15, 000 a month
each.

Does the US$1, 000

pension become taxable
because he is now residing
in the Philippines? Reason
briefly.
Z is a Filipino immigrant
living in the United States
for more than 10 years. He
Taxa
is retired and he came back
tion
to the Philippines as a
of
balikbayan. Every time he
resid
comes to the Philippines,
ent
he stays here for about a Yes. The purchase will be subject to the capital gains tax imposed on the sale
citiz Taxa
month. He regularly of real property and the documentary stamp tax on conveyance of real
ens, tion
receives a pension from his property, if these units are acquired from individual unit owners or domestic
Income non- of
former employer in the corporations who hold them as capital assets. (Section 24(D), 27(D)(5) and
6 Taxatio resid capi 2007
United States, amounting 196, NIRC). If these properties, however were acquired from dealers and/or
n ent tal
to US$1, 000 a month. lessors of real property the purchase will give rise to the imposition of the
citiz gain
While in the Philippines, regular income tax, value added tax and documentary stamp tax. (Section 24-
ens, s
with his pension pay from 28 and 196, NIRC). (UP; PALS)
and
his former employer, he
resid
purchased three
ent
condominium units in
alien
Makati which he is renting
s
out for P15, 000 a month
each.Is his purchase of the
three condominium units
 subject to any tax? Reason
briefly.

Taxa
Antonia Santos, 30 years tion
old, gainfully employed, is of
the sister of Edgardo resi
Santos. She died in an den
airplane crash. Edgardo is a t
lawyer and he negotiated citiz
No. The estate tax is a tax on the privilege enjoyed by an individual in
with the airline company ens,
controlling the disposition of her properties to take effect upon her death.
and insurance company and non
they were able to a agree Income Inco -
The P10M is not a property existing as of the time of decedent’s death; hence,
7 total settlement of P10 Taxatio me resi 2007
it cannot be said that she exercised control over its disposition. Since the
Million. This is what n Tax den
privilege to transmit the property is not exercised by the decedent, the estate
Antonia would have earned t
tax cannot be imposed thereon. (Definition of Estate Tax p. 184, Vitug,
as somebody who was citiz
Compendium of Tax Law and Jurisprudence, Third Revised Edition). (UP; PALS)
gainfully employed. ens,
Edgardo was her only heir. and
resi
Is the P10 Million subject den
to estate tax? Reason t
briefly. alie
ns
 Taxa
Antonia Santos, 30 years
tion
old, gainfully employed, is
of
the sister of Edgardo
resi
Santos. She died in an
den
airplane crash. Edgardo is a
t
lawyer and he negotiated
citiz
with the airline company The P10M should not be reported byEdgardo as his income. The
ens,
and insurance company and amountreceived in a settlement agreement withthe airline company and
non
they were able to a agree insurancecompany is an amount received from theaccident insurance
Income Inco -
total settlement of P10 company is anamount received from the accidentinsurance covering the
8 Taxatio me resi 2007
Million. This is what passengers of theairline company and is in the nature ofcompensation for
n Tax den
Antonia would have earned personal injuries andfor damages sustained on a account ofsuch injuries,
t
as somebody who was which is excluded from thegross income of the recipient. (Section32(B)(4),
citiz
gainfully employed. NIRC). (UP; PALS)
ens,
Edgardo was her only heir.
and
resi
Should Edgardo report the
den
P10 Million as his income
t
being Antonia's only heir?
alie
Reason briefly.
ns
 Nutrition Chippy
Corporation gives all its
employees (rank and file,
supervisors and managers)
one sack of rice every
month valued at P800 per
sack. During an audit
investigation made by the
Bureau of Internal Revenue
(BIR), the BIR assessed the
company for failure to
withhold the corresponding
withholding tax on the There is no legal basis for theassessment. The one sack of rice givento the
Sour
amount equivalent to the supervisors and managers areconsidered de minimis fringe
ces
one sack of rice received by benefitsconsidering that the value per sack doesnot exceed P1,000, hence
of
all the employees, exempted from the fringe benefits tax. (Section 33,NIRC as implemented by Gros
Income inco
contending that the sack of RR No. 10-2000).The one sack of rice per month given tothe rank and file s
9 Taxatio me 2007
rice is considered as employees is, likewise,not subject to tax as part ofcompensation income. This Inco
n subj
additional compensation is a benefitof relatively small value intended topromote the health, me
ect
for the rank and file goodwill,contentment and efficiency of theemployee which will not
to
employees and additional constitutetaxable income of the recipient. (Section2.78.1 (A)(3) of RR No. 2-
tax
fringe benefit for the 98). (UP; PALS)
supervisions and managers.
Therefore, the value of the
one sack of rice every
month should be
considered as part of the
compensation of the rank
and file subject to tax. For
the supervisors and
managers, the employer
should be the one assessed
pursuant to Section 33 (a)
of the NIRC. Is there a legal
 basis for the assessment
made by the BIR? Explain
your answer.

Weber Realty Company

which owns a three-hectare
land in Antipolo entered
into a Joint Venture
Agreement (JVA) with
Prime Development
Company for the
Kind
development of said parcel The JVA entered into between Weber and Prime does not create a separate Cor
Income s of
1 of land. Weber Realty as taxable entity. The joint venture is formed for the purpose of undertaking pora
Taxatio taxp 2007
0 owner of the land construction projects; hence, is not considered as a corporation for income tax tion
n ayer
contributed the land to the purposes. (Section 22 (B), NIRC). (UP; PALS) s
s
Joint Venture and Prime
Development agreed to
develop the same into a
residential subdivision and
construct residential houses
thereon. They agreed that
they would divide the lots
 between them.

Does the JVA entered into

by and between Weber
and Prime create a
separate taxable entity?
Explain briefly.

Weber Realty Company

which owns a three-hectare
land in Antipolo entered
into a Joint Venture
Agreement (JVA) with
Prime Development
Company for the
development of said parcel
of land. Weber Realty as
owner of the land Kind
No. The allocation and distribution of the saleable lots to Weber and Prime is Cor
contributed the land to the Income s of
1 a mere return of their capital contribution. The income tax and the expanded pora
Joint Venture and Prime Taxatio taxp 2007
1 Development agreed to withholding tax is not due on a capital transaction because no income is tion
n ayer
realized from it. (BIR Ruling No. DA-192- 2001, October 17, 2011). (UP; PALS) s
develop the same into a s
residential subdivision and
construct residential houses
thereon. They agreed that
they would divide the lots
between them.Are the
allocation and distribution
of the saleable lots to
Weber and prime subject
to income tax and to
 expanded withholding tax?
Explain briefly.

Weber Realty Company

which owns a three-hectare
land in Antipolo entered
into a Joint Venture
Agreement (JVA) with
Prime Development
Company for the
development of said parcel
of land. Weber Realty as
Kind
owner of the land Yes. The sale by Weber and Prime of their respective shares to third parties is Cor
Income s of
1 contributed the land to the a closed and completed transaction resulting in the realization of income, pora
Taxatio taxp 2007
2 Joint Venture and Prime subject to income tax and to the expanded withholding tax. (BIR Ruling DA-
n ayer
tion
Development agreed to 228-2006). (UP; PALS) s
s
develop the same into a
residential subdivision and
construct residential houses
thereon. They agreed that
they would divide the lots
between them.

Is the sale by Weber or

Prime of their respective
 shares in the saleable lots
to third parties subject to
income tax and to
expanded withholding tax?
Explain briefly.

Noel Santos is a very bright Taxa

computer science graduate. tion
He was hired by Hewlett of
Packard. To entice him to resi
accept the offer for den
employment, he was t
offered the arrangement citiz
that part of is ens,
compensation would be an No. The proceeds of life insurancepolicies paid to the heirs of non
insurance policy with a face beneficiariesupon the death of the insured are notincluded as part of the Income Inco -
1
value of P20 Million. The gross income ofthe recipient. (Section 32 (B)(1), NIRC).There is no income Taxatio me resi 2007
3
parents of Noel are made realized because nothing flows to Noel's parents other than a mere return of n Tax den
the beneficiaries of the capital, the capital being the life of the insured. (UP; PALS) t
insurance policy. citiz
ens,
Will the proceeds of the and
insurance form part of the resi
income of the parents of den
Noel and be subject to t
income tax? Reason alie
briefly. ns
 Noel Santos is a very bright
computer science graduate.
He was hired by Hewlett
Packard. To entice him to
accept the offer for Ded
employment, he was ucti
offered the arrangement Yes. The premiums paid are ordinary and necessary business expenses of the on
Gros
that part of is company. They are allowed as a deduction from gross income so long as the Income fro
1 s
compensation would be an employer is not a direct or indirect beneficiary under the policy of insurance. Taxatio m 2007
4 Inco
insurance policy with a face (Section 36 (A)(4), NIRC). Since the parents of the employee were made the n Gro
me
value of P20 Million. The beneficiaries, the prohibition for their deduction does not exist. (UP; PALS) ss
parents of Noel are made Inco
the beneficiaries of the me
insurance policy.Can the
company deduct from its
gross income the amount
of the premium? Briefly.
Gift
The Congregation of the
s in
Mary Immaculate donated
favo
a land a dormitory building Exe
r of
located along España St. in No. Gifts in favor of an educationaland/or charitable, religious, social welfare mpti
edu
favor of the Sisters of the corporation, or cultural institution, accredited non-government organization, ons
cati
Holy Cross, a group of nuns trust or philanthropic organization or research institution or organization are of
1 Donor’s onal
operating a free clinic and exempt from the donor’s tax, provided, that, not more gifts 2007
5 high school teaching basic Tax /
than 30% of the gifts are used for administration purposes. The donation from
char
spiritual values. being in the nature of a real property complies with the utilization dono
itabl
requirement. (Section 101 (A)(3). NIRC). (UP; PALS) r's
e
Is the donation subject to tax
insti
donor's tax? Reason
tuti
Briefly.
ons
 Remedios, a resident
citizen, died on November
10, 2006. She died leaving
three condominium units in
Quezon City valued at P5
Million each. Rodolfo was
her only heir. He reported Proc
her death on December 5, edu
2006 and filed the estate re
tax, he asked the for
Commissioner of Internal Esta
Revenue to give him one Yes. The Commissioner may allow an extension of time to pay the estate tax if te
year to pay the estate tax the payment on the due date would impose undue hardship upon the Estat Tax
due. The Commissioner estateor any of the heirs. The extension, in any case, will not exceed two years e Settl
1 Estate
approved the request for if the estate is not under judicial settlement of five years if it is under Tax eme 2007
6 extension of time provided Tax
judicialsettlement. The Commissioner may also require the posting of a bond Retu nt:
that the estate tax be to secure the payment of the tax. (Section 91(B),NIRC). (UP; PALS) rn Exte
computed on the basis of nsio
the value of the property at n of
the time of payment of the Pay
tax. men
t of
Does the Commissioner of Tax
Internal Revenue have the
power to extend the
payment of estate tax? If
so, what are the
requirements to allow such
extension?
 Remedios, a resident
citizen, died on November
10, 2006. She died leaving
three condominium units in
Quezon City valued at P5
Million each. Rodolfo was
her only heir. He reported
her death on December 5,
2006 and filed the estate Basi
No. The valuation of properties comprising the estate of a decedent isthe fair
tax, he asked the s in
market as of the time of death. No other valuation date is allowed by law.
Commissioner of Internal Estat the
(Section 88, NIRC). (UP; PALS)Sec. 88 (b) NIRC-Determination of the Value of
Revenue to give him one e valu
1 the EstateThe estate shall be appraised at the FMV as of the time of death. Estate
year to pay the estate tax Tax atio 2007
7 HOWEVER, the appraised value of real property as of the time of death shall Tax
due. The Commissioner Retu n of
be, which ever is the highere of : (1) the FMV as determined by the
approved the request for rn pro
Commissioner; or(2) the FMV as shown in the schedule of values fixed by the
extension of time provided pert
Provincial and City Assessors
that the estate tax be y
computed on the basis of
the value of the property at
the time of payment of the
tax.Does the condition that
the basis of the estate tax
will be the value at the
time of the payment have
legal basis? Reason briefly.
 Remedios, a resident
citizen, died on November
10, 2006. She died leaving
three condominium units in
Quezon City valued at P5
Million each. Rodolfo was
her only heir. He reported Proc
her death on December 5, edu
2006 and filed the estate re
tax, he asked the for
Commissioner of Internal Esta
Revenue to give him one Yes. The Commissioner may allow an extension of time to pay the estate tax if te
year to pay the estate tax the payment on the due date would impose undue hardship upon the Estat Tax
due. The Commissioner estateor any of the heirs. The extension, in any case, will not exceed two years e Settl
1 Estate
approved the request for if the estate is not under judicial settlement of five years if it is under Tax eme 2007
8 extension of time provided Tax
judicialsettlement. The Commissioner may also require the posting of a bond Retu nt:
that the estate tax be to secure the payment of the tax. (Section 91(B),NIRC). (UP; PALS) rn Exte
computed on the basis of nsio
the value of the property at n of
the time of payment of the Pay
tax. men
t of
Does the Commissioner of Tax
Internal Revenue have the
power to extend the
payment of estate tax? If
so, what are the
requirements to allow such
extension?
 Remedios, a resident
citizen, died on November
10, 2006. She died leaving
three condominium units in
Quezon City valued at P5
Million each. Rodolfo was
her only heir. He reported
her death on December 5,
2006 and filed the estate Basi
No. The valuation of properties comprising the estate of a decedent isthe fair
tax, he asked the s in
market as of the time of death. No other valuation date is allowed by law.
Commissioner of Internal Estat the
(Section 88, NIRC). (UP; PALS)Sec. 88 (b) NIRC-Determination of the Value of
Revenue to give him one e valu
1 the EstateThe estate shall be appraised at the FMV as of the time of death. Estate
year to pay the estate tax Tax atio 2007
9 HOWEVER, the appraised value of real property as of the time of death shall Tax
due. The Commissioner Retu n of
be, which ever is the highere of : (1) the FMV as determined by the
approved the request for rn pro
Commissioner; or(2) the FMV as shown in the schedule of values fixed by the
extension of time provided pert
Provincial and City Assessors
that the estate tax be y
computed on the basis of
the value of the property at
the time of payment of the
tax.Does the condition that
the basis of the estate tax
will be the value at the
time of the payment have
legal basis? Reason briefly.
 Remedios, a resident
citizen, died on November
10, 2006. She died leaving
three condominium units in
Quezon City valued at P5
Million each. Rodolfo was
her only heir. He reported Proc
her death on December 5, edu
2006 and filed the estate re
tax, he asked the for
Commissioner of Internal Esta
Revenue to give him one Yes. The Commissioner may allow an extension of time to pay the estate tax if te
year to pay the estate tax the payment on the due date would impose undue hardship upon the Estat Tax
due. The Commissioner estateor any of the heirs. The extension, in any case, will not exceed two years e Settl
2 Estate
approved the request for if the estate is not under judicial settlement of five years if it is under Tax eme 2007
0 extension of time provided Tax
judicialsettlement. The Commissioner may also require the posting of a bond Retu nt:
that the estate tax be to secure the payment of the tax. (Section 91(B),NIRC). (UP; PALS) rn Exte
computed on the basis of nsio
the value of the property at n of
the time of payment of the Pay
tax. men
t of
Does the Commissioner of Tax
Internal Revenue have the
power to extend the
payment of estate tax? If
so, what are the
requirements to allow such
extension?
 Remedios, a resident
citizen, died on November
10, 2006. She died leaving
three condominium units in
Quezon City valued at P5
Million each. Rodolfo was
her only heir. He reported
her death on December 5,
2006 and filed the estate Basi
No. The valuation of properties comprising the estate of a decedent isthe fair
tax, he asked the s in
market as of the time of death. No other valuation date is allowed by law.
Commissioner of Internal Estat the
(Section 88, NIRC). (UP; PALS)Sec. 88 (b) NIRC-Determination of the Value of
Revenue to give him one e valu
2 the EstateThe estate shall be appraised at the FMV as of the time of death. Estate
year to pay the estate tax Tax atio 2007
1 HOWEVER, the appraised value of real property as of the time of death shall Tax
due. The Commissioner Retu n of
be, which ever is the highere of : (1) the FMV as determined by the
approved the request for rn pro
Commissioner; or(2) the FMV as shown in the schedule of values fixed by the
extension of time provided pert
Provincial and City Assessors
that the estate tax be y
computed on the basis of
the value of the property at
the time of payment of the
tax.Does the condition that
the basis of the estate tax
will be the value at the
time of the payment have
legal basis? Reason briefly.
 Remedios, a resident
citizen, died on November
10, 2006. She died leaving
three condominium units in
Quezon City valued at P5
Million each. Rodolfo was
her only heir. He reported Proc
her death on December 5, edu
2006 and filed the estate re
tax, he asked the for
Commissioner of Internal Esta
Revenue to give him one Yes. The Commissioner may allow an extension of time to pay the estate tax if te
year to pay the estate tax the payment on the due date would impose undue hardship upon the Estat Tax
due. The Commissioner estateor any of the heirs. The extension, in any case, will not exceed two years e Settl
2 Estate
approved the request for if the estate is not under judicial settlement of five years if it is under Tax eme 2007
2 extension of time provided Tax
judicialsettlement. The Commissioner may also require the posting of a bond Retu nt:
that the estate tax be to secure the payment of the tax. (Section 91(B),NIRC). (UP; PALS) rn Exte
computed on the basis of nsio
the value of the property at n of
the time of payment of the Pay
tax. men
t of
Does the Commissioner of Tax
Internal Revenue have the
power to extend the
payment of estate tax? If
so, what are the
requirements to allow such
extension?
 Remedios, a resident
citizen, died on November
10, 2006. She died leaving
three condominium units in
Quezon City valued at P5
Million each. Rodolfo was
her only heir. He reported
her death on December 5,
2006 and filed the estate Basi
No. The valuation of properties comprising the estate of a decedent isthe fair
tax, he asked the s in
market as of the time of death. No other valuation date is allowed by law.
Commissioner of Internal Estat the
(Section 88, NIRC). (UP; PALS)Sec. 88 (b) NIRC-Determination of the Value of
Revenue to give him one e valu
2 the EstateThe estate shall be appraised at the FMV as of the time of death. Estate
year to pay the estate tax Tax atio 2007
3 HOWEVER, the appraised value of real property as of the time of death shall Tax
due. The Commissioner Retu n of
be, which ever is the highere of : (1) the FMV as determined by the
approved the request for rn pro
Commissioner; or(2) the FMV as shown in the schedule of values fixed by the
extension of time provided pert
Provincial and City Assessors
that the estate tax be y
computed on the basis of
the value of the property at
the time of payment of the
tax.Does the condition that
the basis of the estate tax
will be the value at the
time of the payment have
legal basis? Reason briefly.
 ABC Corporation won a tax
refund case for P50 Million.
Upon execution of the
judgement and when trying
The BIR has no valid justification to withhold the TCC.
to get the tax Credit
-Offsetting the amountof TCC against a potential tax liability is not allowed,
Certificates (TCC)
because both obligations are not yet fully-liquidated. While the amount of the
representing the refund,
TCC has been determined; the amount of deficiency tax is yet to be
the Bureau of Internal Taxp
determined through the completion of the audit. (Philex Mining Corporation
Revenue (BIR) refused to ayer'
v.CIR, 294 SCRA 687 [1998]). (UP; PALS) TAX
2 issue the TCC on the basis s Refu
REMEDI 2007
4 of the fact that the rem nd
Compensation or Set-off Taxes (Art. 1278) ES
corporation is under audit edie
GR: Taxes are not subject to set-off or legal compensation
by the BIR and it has a s
XPN: Case of Domingo v. Garlitos (1963)
potential tax liability.
There can be legal compensation for tax purposes as long as all the requisite
under Article 1279 of the Civil Code are present. The claims of the taxpayer
Is there a valid justification
and the government
for the BIR to withhold the
issuance of the TCC?
Explain your answer
briefly.
XYZ Corporation, an export BIR rulings are administrative opinions issued by the Commissioner of
oriented company, was Internal Revenue interpretative of a provision of a tax law. They are usually
able to secure a Bureau of rendered upon the request of taxpayers to clarify or interpret certain BIR
Internal Revenue (BIR) provisions of a tax law or revenue regulations or other issuances of the BIR. Ruli
ruling in June 2005 that They state the official position of the BIR to the specific queries raised by a ngs;
General Doct
exempts from tax the taxpayer. BIR rulings rendered by the BIR, like other administrative bodies, do "Rul
Principl rines
2 importation some of its raw not partake of the character of legislative rules which require publication for ings
es OF in 2007
5 materials. The ruling is of their effectivity. Copies thereof are furnished only to the parties involved in
Taxatio Taxa
of
first impression, which the proceedings. (NIRC ANNOTATED - DE LEON)ALTERNATIVE ANSWER: They First
n tion
means the interpretations are the best guess of the moment and incidentally often contain such well- Imp
made by the Commissioner considered and sound law, but the courts have held that they do not prevent ressi
of Internal Revenue is one an entire change of front at any time and are merely advisory – sort of an on"
without established information service to the taxpayer. (Aban, Law of Basic Taxation in the
precedents. Subsequently, Philippines, p. 149 citing Quiazon and Lukban). (UP; PALS)
 however, the BIR issued
another ruling which in
effect would subject to tax
such kind of importation.
XYZ Corporation is
concerned that said ruling
may have a retroactive
effect, which means that all
their importations done
before the issuance of the
second ruling could be
subject to tax.What are BIR
rulings?

XYZ Corporation, an export

oriented company, was
able to secure a Bureau of
Internal Revenue (BIR)
ruling in June 2005 that
exempts from tax the BIR
importation some of its raw Ruli
materials. The ruling is of ngs;
General Doct
first impression, which A BIR ruling of first impression to be valid must not be against the law and it "Rul
Principl rines
2 means the interpretations must be issued only by the Commissioner of Internal Revenue. (Philippine ings
es OF in 2007
6 made by the Commissioner Bank of Communications v. CIR, 302 SCRA 241 [1999]; Section 7, NIRC). (UP;
Taxatio Taxa
of
of Internal Revenue is one PALS) First
n tion
without established Imp
precedents. Subsequently, ressi
however, the BIR issued on"
another ruling which in
effect would subject to tax
such kind of importation.
XYZ Corporation is
concerned that said ruling
may have a retroactive
effect, which means that all
their importations done
before the issuance of the
second ruling could be
subject to tax.

What is required to make a

BIR ruling of first
impression a valid one?
 XYZ Corporation, an export
oriented company, was
able to secure a Bureau of
Internal Revenue (BIR)
ruling in June 2005 that
exempts from tax the
importation some of its raw
materials. The ruling is of
No. A BIR ruling cannot be given retroactive effect if its retroactive application
first impression, which
is prejudicial to the taxpayer. (Section 246, NIRC; CIR v. Court of Appeals et. Al.
means the interpretations
267 SCRA 557 [1997]). ALTERNATIVE ANSWER: The general rule is that a BIR
made by the Commissioner
ruling does not have a retroactive effect if giving it a retroactive application is
of Internal Revenue is one BIR
prejudicial to the taxpayer. However, if the first ruling is tainted with either of
without established Ruli
the following: (1) misstatement or omission of materials facts, (2) the facts
precedents. Subsequently, ngs;
gathered by the BIR are materially different from the facts upon which the General Doct
however, the BIR issued "Rul
ruling is based, or (3) the taxpayer acted in bad faith, a subsequent ruling can Principl rines
2 another ruling which in ings
have a retroactive application. (ABS-CBN Broadcasting Co. v. CTA & CIR, 08 es OF in 2007
7 effect would subject to tax SCRA 142 [1981]; Sec 246, NIRC). (UP; PALS)Note: Non-Retroactivity of Taxatio Taxa
of
such kind of importation. First
Rulings- Sec. 246 NIRCGeneral Rule: Any revocation, modification or reversal n tion
XYZ Corporation is Imp
of any of the rules and regulations rulings and circulars promulgated by the
concerned that said ruling ressi
Commissioner shall NOT be given retroactive application, if it will be
may have a retroactive on"
prejudicial to the taxpayers.Exceptions:1. Where the taxpayer deliberately
effect, which means that all
misstates or omits material facts from his return or any document; 2. where
their importations done
the facts subsequently gathered by the BIR are materially different from the
before the issuance of the
facts on which the ruling is based; or3. where the taxpayer acted in bad faith
second ruling could be
subject to tax.Does a BIR
ruling have a retroactive
effect, considering the
principle that tax
exemptions should be
interpreted strictly against
the taxpayer?
 Tax
es
What kind of taxes, fees The following taxes, fees and charges are considered to be National Internal Con
General
and charges are considered Revenue Taxes under the National Internal Revenue Code: (A) Income tax; (B) Kind side
Principl
2 as National Internal Estate and donor’s taxes; (C) Value-added tax; (D) Other percentage taxes; (E) s of red
es OF 2007
8 Revenue Taxes under the Excise taxes; (F) Documentary stamp taxes; and Such other taxes as are or
Taxatio
taxe as
National Internal Revenue hereafter may be imposed and collected by the Bureau of Internal Revenue. s NIR
n
Code (NIRC)? (Section 21, NIRC). (UP; PALS) C
Tax
es
JKL Corporation is a
domestic corporation
engaged in the importation
and sale of motor vehicles
in the Philippines and is
duly registered with the
Subic Bay Metropolitan
Authority ( SBMA ). In
December 2007, it No. because domestic corporations importing used vehicles that are “stored, VAT
imported several second- used or traded” within the Subic Naval Base Area enjoy an exemption from exe R.A.
Value-
hand motor vehicles from customs duties and VAT, provided they are registered with the SBMA (R.A. mpt No.
1 Added 2008
Japan and Korea, which it 7096; Executive Secretary v. Southwing Heavy Industries, G.R. No. 164171, 20 trans 709
Tax
stores in a warehouse in February2006). UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW actio 6
Subic Bay. It sold these SCHOOLS ns
motor vehicles in April
2008, to persons residing in
the customs territory. Are
the importations of motor
vehicles from abroad
subject to customs duties
and value added taxes?
Explain. ( 4% )
 JKL Corporation is a
domestic corporation
engaged in the importation
and sale of motor vehicles
in the Philippines and is
duly registered with the
Subic Bay Metropolitan
Authority ( SBMA ). In
December 2007, it
imported several second-
Duties and taxes must be paid upon release of the vehicle from Customs’ Requ Obli
hand motor vehicles from
custody. Custom duties for motor vehicles are based on the value being used irem gati
Japan and Korea, which it Tariff
by the Bureau for assessing customs duties. VAT is also based on the value ents ons
stores in a warehouse in and
2 being used by the Bureau for motor vehicles (Sec. 107[A] NIRC). Duties must of of 2008
Subic Bay. It sold these Custom
be paid to the Bureau of Customs. VAT must be paid to the Bureau of Internal impo imp
motor vehicles in April s
Revenue. UP LAW COMPLEX & PHILIPPINE ASSOCIATION rtati orta
2008, to persons residing in
OF LAW SCHOOLS on tion
the customs territory.

if they are taxable, when

must the duties and taxes
be paid? What are the
bases for and purposes of
computing customs duties
and VAT? To whom must
the duties and VAT be
paid? Explain. ( 3% )
 William Antonio imported
into the Philippines a luxury
car worth US$100,00. This
car was, however, declared
only for US$20,000 and
corresponding customs
duties and taxes were paid
thereon. Subsequently, the Yes, Under-declaration of value is a
Collector of Customs ground for forfeiture (See Sec. 1206, Tariff Gov
Rem
discovered the Tariff and Customs Code; See also and ern
3 edie 2008
underdeclaration and he Feeder International v. CA, G.R. No. Custom men
s
initiated forfeiture 94262, 31 May 1991). UP LAW COMPLEX & PHILIPPINE ASSOCIATION s t
proceedings of the OF LAW SCHOOLS
imported car.

a. may the Collector of

Customs declare the
imported car forfeited in
favor of the government?
Explain. ( 3% )
 William Antonio imported
into the Philippines a luxury
car worth US$100,00. This
car was, however, declared
only for US$20,000 and
corresponding customs No, a forfeiture proceeding under tariffand customs laws in not penal in
duties and taxes were paid nature,the main purpose of which is to enforcethe administrative fines or
thereon. Subsequently, the forfeitureincident to unlawful importation ofgoods or their deliberate Tariff Gov
Rem
Collector of Customs possession. Thepenalty in seizure cases is distinct andseparate from the and ern
4 edie 2008
discovered the criminal liability thatmight be imposed against the indictedimporter or Custom men
s
underdeclaration and he possessor and both kinds ofpenalties may be imposed (Peo. v. CFI ofRizal, et s t
initiated forfeiture al., No. L-41686, 17 November1980).UP LAW COMPLEX & PHILIPPINE
proceedings of the ASSOCIATIONOF LAW SCHOOLS
imported car. Are
forfeiture proceedings of
goods illegally imported
criminal in nature? Explain
( 3% )
 The City of Manila enacted Twenty five percent (25%) of total salesor P2.5 million shall be taxed in
an ordinance, imposing a Cebuand 15% of total sales or P1.5 millionshall be taxed in Davao. For Spec
5% tax on gross receipts on theremaining 60% sales amounting to P6million which are recorded in ific
rentals of space in theprincipal office, 30% thereof or P1.8million is taxable in Quezon City taxin
privately-owned public wherethe principal office is located and 70% orP4.2 million is taxable in g Situ
Local
markets. BAT Corporation Marikina Citywhere the factory is located.Under the law, pow s of
Govern
questioned the validity of manufacturersmaintaining a branch or sales outletshall record the sale in the er of tax
5 ment 2008
the ordinance, stating that branch orsales outlet making the sale and pay thetax in the city or Local coll
Taxatio
the tax is an income tax, municipality where thebranch or outlet is located. SinceFerremaro, Inc. Gove ecte
n
which cannot be imposed maintains one factory,the sales recorded in the principal officeshall be rnm d
by the city government. Do allocated and 30% of said salesare taxable in the place where theprincipal ent
you agree with the position office is located while 70% istaxable in the place where the factory islocated Unit
of BAT Corporation? (Sec. 150, LGC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW s
Explain. ( 5% ) SCHOOLS
 MNO Corporation was
organized onJuly 1, 2006, to
engage in trading of
schoolsupplies, with
principal place of business
inCubao, Quezon City. Its
books of accountsand
income statement showing
gross salesas follows:July 1,
2006 to December 31,
2006P5,000,000.January 1,
2007 to June 30,
Tax
2007P10,000,000.July 1,
peri
2007 to December 31,
Yes. Under Sec. 165 of the LocalGovernment Code, the taxable period forthe Colle od
200715,000,000.Since MNO Local
payment of business taxes is thecalendar year.UP LAW COMPLEX & ction and
Corporation adopted fiscal Govern
PHILIPPINE ASSOCIATIONOF LAW SCHOOLSNote: Sec. 165 LGC- Tax Period of man
6 yearending June 30 as its ment 2008
amd Manner of Payment- Unless otherwise provided in this Code, the tax busi ner
taxable year forincome tax Taxatio
period of all local taxes, fees and charges shall be the calendar year. Such ness of
purposes, it paid its n
taxes and charges may be paid in quarterly installment tax pay
2%business tax for fiscal
men
year ending June 30,2007
t
based on gross sales of P15
million.However, the
Quezon City
Treasurerassessed the
corporation for
deficiencybusiness tax for
2007 based on gross salesof
P25 million alleging that
local businesstaxes shall be
computed based on
calendaryear . a. Is the
position of the city
treasurer tenable? Explain.
(3%)
 MNO Corporation was
organized onJuly 1, 2006, to
engage in trading of
schoolsupplies, with
principal place of business
inCubao, Quezon City. Its
books of accountsand
income statement showing
gross salesas follows:July 1,
2006 to December 31,
2006P5,000,000.January 1,
2007 to June 30,
2007P10,000,000.July 1, Aut
Natu
2007 to December 31, hori
Yes, provided there is a valid tax ordinance enacted for that purpose that does re
200715,000,000.Since MNO ty to
not impose such surcharge and/or interest on any taxes not paid (Sec. 192, Local and
Corporation adopted fiscal gran
Local Government Code).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF Govern Sour
yearending June 30 as its t
7 LAW SCHOOLSNote: Sec. 192 LGC Authority to Grant Tax Exemptions ment ce of 2008
taxable year forincome tax loca
Privileges- Local Government units may, through ordinances duly approved, Taxatio Taxi
purposes, it paid its l tax
grant tax exemptions, incentives or reliefs under such terms and conditions as n ng
2%business tax for fiscal exe
they may deem necessary. Pow
year ending June 30,2007 mpt
er
based on gross sales of P15 ions
million.However, the
Quezon City
Treasurerassessed the
corporation for
deficiencybusiness tax for
2007 based on gross salesof
P25 million alleging that
local businesstaxes shall be
computed based on
calendaryear. b. May the
deficiency business tax be
paid in installments
without surcharge and
interest? Explain. (3%)
 In January 1970, Juan
Gonzales bought one
hectare of agricultural land
in Laguna for P100,000. This
property has a current fair
market value of P10 million
in view of the construction
of a concrete road
traversing the property.
Juan Gonzales agreed to Inco
exchange his agricultural lot me
in Laguna for a one-half With regard to the Laguna property, it is a capital asset because it is fro
hectare residential property agricultural land. The Batangas property, in contrast, is an ordinary asset Gros m
Income
located in Batangas, with a because it is either (1) held for sale to customers in the ordinary course of s deal
8 Taxatio 2008
fair market value of P10 business or (2) real property used in the trade of business of a realtor like Inco ings
n
million, owned by Alpha Alpha Corp (Secs. 24[D1], 39[A1]2 NIRC; and RR No. 7-2003). (UP LAW me in
Corporation, a domestic COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS) pro
corporation engaged in the pert
purchase and sale of real y
property. Alpha
Corporation acquired the
property in 2007 for P9
million. What is the nature
of real properties
exchanged for tax
purposes - capital asset or
ordinary asset? Explain. (
3% )
 In January 1970, Juan
Gonzales bought one
hectare of agricultural land
in Laguna for P100,000. This
property has a current fair
market value of P10 million
in view of the construction Taxa
of a concrete road tion
traversing the property. of
Juan Gonzales agreed to resid
exchange his agricultural lot ent
in Laguna for a one-half No. The difference in the supposed taxable value cannot be legally subject to citiz Taxa
hectare residential property the donor’s tax, because the use of a fair market value other than that ens, tion
located in Batangas, with a prescribed by the Tax Code is not allowed for computing any internal revenue Income non- of
9 fair market value of P10 tax. Taxatio resid capi 2008
million, owned by Alpha (Section 6(E), NIRC). n ent tal
Corporation, a domestic UP LAW COMPLEX & PHILIPPINE ASSOCIATION citiz gain
corporation engaged in the OF LAW SCHOOLS ens, s
purchase and sale of real and
property. Alpha resid
Corporation acquired the ent
property in 2007 for P9 alien
million. s

Is Juan Gonzales subject to

income tax on the
exchange of property? If
so, what is the tax based
and rate? Explain. ( 3% )
 In January 1970, Juan
Gonzales bought one
hectare of agricultural land
in Laguna for P100,000. This
property has a current fair
market value of P10 million
in view of the construction
of a concrete road
Yes. Alpha must pay corporate income tax at the rate of 35% of the residential
traversing the property.
property’s fair market value of P10 million (Sec. 27[A] NIRC).UP LAW
Juan Gonzales agreed to
COMPLEX & PHILIPPINE ASSOCIATION
exchange his agricultural lot
OF LAW SCHOOLS Taxa
in Laguna for a one-half
tion
hectare residential property
Note: Sec 27(A) Rates of Income Tax on Domestic Corporations (as amended of
located in Batangas, with a Income Tax
1 by RA 9337) dom
fair market value of P10 Taxatio Pay 2008
0 million, owned by Alpha Except as otherwise provided in this Code, an income tax of thirty-five percent estic
n able
(35%) is hereby imposed upon the taxable income derived during each taxable corp
Corporation, a domestic
year from all sources within and without the Philippines by every corporation, orati
corporation engaged in the
as defined in Section 22(B) of this Code and taxable under this Title as a ons
purchase and sale of real
corporation, organized in, or existing under the laws of the Philippines:
property. Alpha
Provided, That effective January 1, 2009, the rate of income tax shall be
Corporation acquired the
thirty percent (30%).
property in 2007 for P9
million.

Is Alpha Corporation
subject to income tax on
the exchange of property?
If so, what is the tax base
and rate? Explain. ( 3% )
 While driving his car to
Baguio lastmonth, Pedro
Asuncion, together with
hiswife Assunta, and only
son, Jaime, met anaccident
that caused that
instantaneousdeath of
Jaime. The following day,
Assuntaalso died in the
hospital. The spouses
Ded
andtheir son had the Yes. Provided that the estate tax of the property of Jaime was paid before Ded
ucti
following assets Assunta died, as provided for in Sec. 86(A2) NIRC. Vanishing deduction equal uctio
ons
1 andliabilities at the time of to 100% is applicable to Assunta’s estate as regards ½ of the cash she Estate ns
fro 2008
1 death:Properties Assunta inherited from her son Jaime. Assunta died within one (1) year after receiving Tax from
m
JaimeExclusive Conjugal her share of Jaime’s estate.UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF Estat
Esta
ExclusiveCash P 10M P LAW SCHOOLS e
te
1.2MCars P 2M P 500KLand
P 5M P
2MResidentialhouseP
4MMortgagepayableP
2.5MFuneralexpenses P
300K
b. Is vanishing deduction
applicable to the Estate of
Assunta Asuncion? Explain
( 4% )
 John McDonald, a U.S.
Citizen residing in Makati
Taxa
City, bought shares of stock
tion
of a domestic corporation
of
whose shares are listed and
resid
traded in the Philippine
ent
Stock Exchange at the price
citiz Taxa
of P2 million Yesterday, he
ens, tion
sold the shares of stock Yes, He is liable for a final income tax of5% on first P100,000 net capital
Income non- of
1 through his favorite Makati gain,and 10% for any amount in excess ofP100,000 net capital gain
Taxatio resid capi 2008
2 stockbroker at a gain of (Sec.24[C]NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW
n ent tal
P200,000. If John SCHOOLS
citiz gain
McDonald deriectly sold
ens, s
the shares to his best
and
friend, who is another U.S.
resid
Citizen residing in Makati,
ent
at a gain of P200,000. Is he
alien
liable for Philippine Income
s
Tax? If so, what is the ntax
base and rate? ( 3% )
Spouses Jose San Pedro and
Clara San Pedro, both
Filipino citizens, are the No. The law classiffies the donated property as an exclusion from the income
Excl
owners of a residential tax, and therefrom exempt from income tax. UP LAW COMPLEX & PHILIPPINE
usio
house and lot in Quezon ASSOCIATION
ns
City. After the recent OF LAW SCHOOLS Gros
Income fro
1 wedding of their son, s
Taxatio m 2008
3 Mario, to Maria, the Note: Sec. 32 (B)(3) - Exclusions from Gross Income Inco
n Gro
spouses donated said real Gifts, Bequests, and Devices.- The value of property acquired by gift, bequest, me
ss
property to them. At the devise, or descent: Provided, However, that income from such property, as
Inco
time of donation, the real well as gift, bequest, devise, or descent of income from any property, in cases
me
property has a fair market of transfers of divided interest, shall be included in gross income
value of P2 million.
 Are Mario and Maria
subject to income tax the
value of the real property
donated to them? Explain.
(4%)

In 2007, spouses Renato

and Judy Garcia opened
peso and dollar deposits at
the Philippine branch of the
Hong Kong Bank in Manila.
Renato is an overseas
All the properties and interests enumerated in the problem should be
worker in Hong Kong while
included in the gross estate if the decedent.
Judy lives and works in
Situ
Manila. During the year, the
The composition of a gross estate of a decedent who is a citizen of the s of
bank paid interest income
Philippines includes all properties, tangible or intangible, wherever situated Taxa
of P10,000 on the peso Gros
and to the extent of the interest that he has thereon at the time of his death Income tion
1 deposit and USS1,000 on s
(Sec 85, NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW Taxatio ; 2008
4 the dollar deposit. The bank SCHOOLS n
Inco
Pass
withheld final income tax me
ive
equivalent to 20% of the
Note: Sec. 85 NIRC - Gross Estate Inco
entire interest income and
The value of the gross estate of the decedent shall be determined by including me
remitted the same to the
the value at the time of his death of ALL PROPERTY, real or personal, tangible
BIR.
or intangible, wherever situated: xxx
Are the interest incomes
on the bank deposits of
spouses Renato and Judy
Garcia subject to income
tax? Explain. (4%)
 In 2007, spouses Renato
and Judy Garcia opened
peso and dollar deposits at
the Philippine branch of the
Hong Kong Bank in Manila.
Renato is an overseas
worker in Hong Kong while Situ
Judy lives and works in s of
Manila. During the year, the Taxa
Gros
bank paid interest income No, The bank should withhold only 7.5% on the final interest income of the Income tion
1 s
of P10,000 on the peso wife. The husband is exempt.UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF Taxatio ; 2008
5 Inco
deposit and USS1,000 on LAW SCHOOLS n Pass
me
the dollar deposit. The bank ive
withheld final income tax Inco
equivalent to 20% of the me
entire interest income and
remitted the same to the
BIR. Is the bank correct in
withholding the 20% final
tax on the entire interest
income? Explain. (3%)
Spouses Jose San Pedro and
Clara San Pedro, both
Filipino citizens, are the
owners of a residential Yes, because the value of the gift exceeds P10,000 (Sec. 101 [A1] NIRC).
Sch
house and lot in Quezon
Pers edul
City. After the recent However, they are each entitled to a deduction of P100,000 for the net value
1 Donor’s on e of
wedding of their son, of the gift (Sec.99[B] NIRC). Each spouse shall be liable for a taxable gift worth 2008
6 Tax liabl Tax
Mario, to Maria, the P890,000 each at the progressive rate of 2-15%, since the donee is a relative.
e Rate
spouses donated said real UP LAW COMPLEX & PHILIPPINE ASSOCIATION
s
property to them. At the OF LAW SCHOOLS
time of donation, the real
property has a fair market
value of P2 million.
 Are Jose and Clara subject
to donor's tax? If so, how
much is the taxable gift of
each spouse and what rate
shall be applied to the gift?
Explain. (4%)

Jose Cerna, Filipino citizen,

married to Maria Cerna,
died in a vehicular accident
in NLEX on July 10, 2007.
The spouses owned, among
others, a 100-hectare
agricultural land in Sta.
Rosa, Laguna with current
Basi
fair market value of P20 Time
s in
million, which was subject and
the
to matter of a Joint Venture Tran
No. The BIR is not correct. The property valuation should be fixed at P20 valu
1 Agreement about to be Estate sfer
million, which was the value at the time of the death of Jose Cernan (Sec. atio 2008
7 implemented with Star 88[A] NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
Tax of
n of
Land Corporation ( SLC ), a Prop
pro
well-known real estate ertie
pert
development company. He s
y
bought the said real
property for P2 million fifty
years ago. On January
5,2008, the administrator
of the estate and SLC jointly
announced their big plans
to start conversion and
development of the
agricultural lands in Sta.
Rosa, Laguna, into first-
class residential and
commercial centers. As a
result, the prices of real
properties in the locality
have doubled. The
administrator of the Estate
of Jose Cernan filed the
estate tax return on
January 9, 2008, by
including in the gross estate
the real property at P2
million. After 9 months, the
BIR issued deficiency estate
tax assessment, by valuing
the real property at P40
million. Is the BIR correct in
valuing the real property at
P40 million? Explain. ( 3% )
 Jose Cerna, Filipino citizen,
married to Maria Cerna,
died in a vehicular accident
in NLEX on July 10, 2007.
The spouses owned, among
others, a 100-hectare
agricultural land in Sta.
Rosa, Laguna with current
fair market value of P20
million, which was subject
to matter of a Joint Venture
Agreement about to be
implemented with Star
Basi
Land Corporation ( SLC ), a Time
s in
well-known real estate and
the
development company. He Tran
For purposes of computing the estate tax, the value should have been P20 valu
1 bought the said real Estate sfer
million because that was the value of the property at the time of death (Sec. atio 2008
8 property for P2 million fifty 88[A]NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
Tax of
n of
years ago. On January Prop
pro
5,2008, the administrator ertie
pert
of the estate and SLC jointly s
y
announced their big plans
to start conversion and
development of the
agricultural lands in Sta.
Rosa, Laguna, into first-
class residential and
commercial centers. As a
result, the prices of real
properties in the locality
have doubled. The
administrator of the Estate
of Jose Cernan filed the
estate tax return on
January 9, 2008, by
including in the gross estate
the real property at P2
million. After 9 months, the
BIR issued deficiency estate
tax assessment, by valuing
the real property at P40
million. If you disagree,
what is the correct value to
used for estate tax
purposes? Explain. ( 3% )
 While driving his car to
Baguio lastmonth, Pedro
Asuncion, together with
hiswife Assunta, and only
son, Jaime, met anaccident
that caused that
instantaneousdeath of
Dete
Jaime. The following day,
rmin
Assuntaalso died in the
ation
hospital. The spouses Ded
No. By availing of the standard deduction of P1 million (Sec. 86 [A5] NIRC); of
andtheir son had the ucti
funeral expenses not exceeding P200,000 and in no case, to exceed 5% of the Gros
following assets ons
1 gross estate (Sec. 86[A1a] NIRC); and medical expenses not more than Estate s
andliabilities at the time of fro 2008
9 death:Properties Assunta P500,000 (Sec. 86[A6] NIRC), the result is a negative net estate. Therefore, Tax Estat
m
there is no estate tax liability.UP LAW COMPLEX & PHILIPPINE e
JaimeExclusive Conjugal esta
ASSOCIATIONOF LAW SCHOOLS and
ExclusiveCash P 10M P te
Net
1.2MCars P 2M P 500KLand
Estat
P 5M P
e
2MResidentialhouseP
4MMortgagepayableP
2.5MFuneralexpenses P
300K
a. Is the Estate of Jaime
Asuncion liable for estate
tax? Explain. ( 4% )
 Jose Cerna, Filipino citizen,
married to Maria Cerna,
died in a vehicular accident
in NLEX on July 10, 2007.
The spouses owned, among
others, a 100-hectare
agricultural land in Sta.
Rosa, Laguna with current
fair market value of P20
million, which was subject
to matter of a Joint Venture
Agreement about to be
implemented with Star
Basi
Land Corporation ( SLC ), a Time
s in
well-known real estate and
the
development company. He Tran
No. The BIR is not correct. The property valuation should be fixed at P20 valu
2 bought the said real Estate sfer
million, which was the value at the time of the death of Jose Cernan (Sec. atio 2008
0 property for P2 million fifty 88[A] NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
Tax of
n of
years ago. On January Prop
pro
5,2008, the administrator ertie
pert
of the estate and SLC jointly s
y
announced their big plans
to start conversion and
development of the
agricultural lands in Sta.
Rosa, Laguna, into first-
class residential and
commercial centers. As a
result, the prices of real
properties in the locality
have doubled. The
administrator of the Estate
of Jose Cernan filed the
estate tax return on
January 9, 2008, by
including in the gross estate
the real property at P2
million. After 9 months, the
BIR issued deficiency estate
tax assessment, by valuing
the real property at P40
million. Is the BIR correct in
valuing the real property at
P40 million? Explain. ( 3% )
 Jose Cerna, Filipino citizen,
married to Maria Cerna,
died in a vehicular accident
in NLEX on July 10, 2007.
The spouses owned, among
others, a 100-hectare
agricultural land in Sta.
Rosa, Laguna with current
fair market value of P20
million, which was subject
to matter of a Joint Venture
Agreement about to be
implemented with Star
Basi
Land Corporation ( SLC ), a Time
s in
well-known real estate and
the
development company. He Tran
For purposes of computing the estate tax, the value should have been P20 valu
2 bought the said real Estate sfer
million because that was the value of the property at the time of death (Sec. atio 2008
1 property for P2 million fifty 88[A]NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
Tax of
n of
years ago. On January Prop
pro
5,2008, the administrator ertie
pert
of the estate and SLC jointly s
y
announced their big plans
to start conversion and
development of the
agricultural lands in Sta.
Rosa, Laguna, into first-
class residential and
commercial centers. As a
result, the prices of real
properties in the locality
have doubled. The
administrator of the Estate
of Jose Cernan filed the
estate tax return on
January 9, 2008, by
including in the gross estate
the real property at P2
million. After 9 months, the
BIR issued deficiency estate
tax assessment, by valuing
the real property at P40
million. If you disagree,
what is the correct value to
used for estate tax
purposes? Explain. ( 3% )
 While driving his car to
Baguio lastmonth, Pedro
Asuncion, together with
hiswife Assunta, and only
son, Jaime, met anaccident
that caused that
instantaneousdeath of
Dete
Jaime. The following day,
rmin
Assuntaalso died in the
ation
hospital. The spouses Ded
No. By availing of the standard deduction of P1 million (Sec. 86 [A5] NIRC); of
andtheir son had the ucti
funeral expenses not exceeding P200,000 and in no case, to exceed 5% of the Gros
following assets ons
2 gross estate (Sec. 86[A1a] NIRC); and medical expenses not more than Estate s
andliabilities at the time of fro 2008
2 death:Properties Assunta P500,000 (Sec. 86[A6] NIRC), the result is a negative net estate. Therefore, Tax Estat
m
there is no estate tax liability.UP LAW COMPLEX & PHILIPPINE e
JaimeExclusive Conjugal esta
ASSOCIATIONOF LAW SCHOOLS and
ExclusiveCash P 10M P te
Net
1.2MCars P 2M P 500KLand
Estat
P 5M P
e
2MResidentialhouseP
4MMortgagepayableP
2.5MFuneralexpenses P
300K
a. Is the Estate of Jaime
Asuncion liable for estate
tax? Explain. ( 4% )
 Jose Cerna, Filipino citizen,
married to Maria Cerna,
died in a vehicular accident
in NLEX on July 10, 2007.
The spouses owned, among
others, a 100-hectare
agricultural land in Sta.
Rosa, Laguna with current
fair market value of P20
million, which was subject
to matter of a Joint Venture
Agreement about to be
implemented with Star
Basi
Land Corporation ( SLC ), a Time
s in
well-known real estate and
the
development company. He Tran
No. The BIR is not correct. The property valuation should be fixed at P20 valu
2 bought the said real Estate sfer
million, which was the value at the time of the death of Jose Cernan (Sec. atio 2008
3 property for P2 million fifty 88[A] NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
Tax of
n of
years ago. On January Prop
pro
5,2008, the administrator ertie
pert
of the estate and SLC jointly s
y
announced their big plans
to start conversion and
development of the
agricultural lands in Sta.
Rosa, Laguna, into first-
class residential and
commercial centers. As a
result, the prices of real
properties in the locality
have doubled. The
administrator of the Estate
of Jose Cernan filed the
estate tax return on
January 9, 2008, by
including in the gross estate
the real property at P2
million. After 9 months, the
BIR issued deficiency estate
tax assessment, by valuing
the real property at P40
million. Is the BIR correct in
valuing the real property at
P40 million? Explain. ( 3% )
 Jose Cerna, Filipino citizen,
married to Maria Cerna,
died in a vehicular accident
in NLEX on July 10, 2007.
The spouses owned, among
others, a 100-hectare
agricultural land in Sta.
Rosa, Laguna with current
fair market value of P20
million, which was subject
to matter of a Joint Venture
Agreement about to be
implemented with Star
Basi
Land Corporation ( SLC ), a Time
s in
well-known real estate and
the
development company. He Tran
For purposes of computing the estate tax, the value should have been P20 valu
2 bought the said real Estate sfer
million because that was the value of the property at the time of death (Sec. atio 2008
4 property for P2 million fifty 88[A]NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
Tax of
n of
years ago. On January Prop
pro
5,2008, the administrator ertie
pert
of the estate and SLC jointly s
y
announced their big plans
to start conversion and
development of the
agricultural lands in Sta.
Rosa, Laguna, into first-
class residential and
commercial centers. As a
result, the prices of real
properties in the locality
have doubled. The
administrator of the Estate
of Jose Cernan filed the
estate tax return on
January 9, 2008, by
including in the gross estate
the real property at P2
million. After 9 months, the
BIR issued deficiency estate
tax assessment, by valuing
the real property at P40
million. If you disagree,
what is the correct value to
used for estate tax
purposes? Explain. ( 3% )
 While driving his car to
Baguio lastmonth, Pedro
Asuncion, together with
hiswife Assunta, and only
son, Jaime, met anaccident
that caused that
instantaneousdeath of
Dete
Jaime. The following day,
rmin
Assuntaalso died in the
ation
hospital. The spouses Ded
No. By availing of the standard deduction of P1 million (Sec. 86 [A5] NIRC); of
andtheir son had the ucti
funeral expenses not exceeding P200,000 and in no case, to exceed 5% of the Gros
following assets ons
2 gross estate (Sec. 86[A1a] NIRC); and medical expenses not more than Estate s
andliabilities at the time of fro 2008
5 death:Properties Assunta P500,000 (Sec. 86[A6] NIRC), the result is a negative net estate. Therefore, Tax Estat
m
there is no estate tax liability.UP LAW COMPLEX & PHILIPPINE e
JaimeExclusive Conjugal esta
ASSOCIATIONOF LAW SCHOOLS and
ExclusiveCash P 10M P te
Net
1.2MCars P 2M P 500KLand
Estat
P 5M P
e
2MResidentialhouseP
4MMortgagepayableP
2.5MFuneralexpenses P
300K
a. Is the Estate of Jaime
Asuncion liable for estate
tax? Explain. ( 4% )
 Jose Cerna, Filipino citizen,
married to Maria Cerna,
died in a vehicular accident
in NLEX on July 10, 2007.
The spouses owned, among
others, a 100-hectare
agricultural land in Sta.
Rosa, Laguna with current
fair market value of P20
million, which was subject
to matter of a Joint Venture
Agreement about to be
implemented with Star
Basi
Land Corporation ( SLC ), a Time
s in
well-known real estate and
the
development company. He Tran
No. The BIR is not correct. The property valuation should be fixed at P20 valu
2 bought the said real Estate sfer
million, which was the value at the time of the death of Jose Cernan (Sec. atio 2008
6 property for P2 million fifty 88[A] NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
Tax of
n of
years ago. On January Prop
pro
5,2008, the administrator ertie
pert
of the estate and SLC jointly s
y
announced their big plans
to start conversion and
development of the
agricultural lands in Sta.
Rosa, Laguna, into first-
class residential and
commercial centers. As a
result, the prices of real
properties in the locality
have doubled. The
administrator of the Estate
of Jose Cernan filed the
estate tax return on
January 9, 2008, by
including in the gross estate
the real property at P2
million. After 9 months, the
BIR issued deficiency estate
tax assessment, by valuing
the real property at P40
million. Is the BIR correct in
valuing the real property at
P40 million? Explain. ( 3% )
 Jose Cerna, Filipino citizen,
married to Maria Cerna,
died in a vehicular accident
in NLEX on July 10, 2007.
The spouses owned, among
others, a 100-hectare
agricultural land in Sta.
Rosa, Laguna with current
fair market value of P20
million, which was subject
to matter of a Joint Venture
Agreement about to be
implemented with Star
Basi
Land Corporation ( SLC ), a Time
s in
well-known real estate and
the
development company. He Tran
For purposes of computing the estate tax, the value should have been P20 valu
2 bought the said real Estate sfer
million because that was the value of the property at the time of death (Sec. atio 2008
7 property for P2 million fifty 88[A]NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
Tax of
n of
years ago. On January Prop
pro
5,2008, the administrator ertie
pert
of the estate and SLC jointly s
y
announced their big plans
to start conversion and
development of the
agricultural lands in Sta.
Rosa, Laguna, into first-
class residential and
commercial centers. As a
result, the prices of real
properties in the locality
have doubled. The
administrator of the Estate
of Jose Cernan filed the
estate tax return on
January 9, 2008, by
including in the gross estate
the real property at P2
million. After 9 months, the
BIR issued deficiency estate
tax assessment, by valuing
the real property at P40
million. If you disagree,
what is the correct value to
used for estate tax
purposes? Explain. ( 3% )
 While driving his car to
Baguio lastmonth, Pedro
Asuncion, together with
hiswife Assunta, and only
son, Jaime, met anaccident
that caused that
instantaneousdeath of
Dete
Jaime. The following day,
rmin
Assuntaalso died in the
ation
hospital. The spouses Ded
No. By availing of the standard deduction of P1 million (Sec. 86 [A5] NIRC); of
andtheir son had the ucti
funeral expenses not exceeding P200,000 and in no case, to exceed 5% of the Gros
following assets ons
2 gross estate (Sec. 86[A1a] NIRC); and medical expenses not more than Estate s
andliabilities at the time of fro 2008
8 death:Properties Assunta P500,000 (Sec. 86[A6] NIRC), the result is a negative net estate. Therefore, Tax Estat
m
there is no estate tax liability.UP LAW COMPLEX & PHILIPPINE e
JaimeExclusive Conjugal esta
ASSOCIATIONOF LAW SCHOOLS and
ExclusiveCash P 10M P te
Net
1.2MCars P 2M P 500KLand
Estat
P 5M P
e
2MResidentialhouseP
4MMortgagepayableP
2.5MFuneralexpenses P
300K
a. Is the Estate of Jaime
Asuncion liable for estate
tax? Explain. ( 4% )
 DEF Corporation is wholly
owned subsidiary of DEF,
Inc., California, USA.
Starting December 15,
2004, DEF Corporation paid
annual royalties to DEF,
Inc., for the use of the
latter's software, for which
the former, as with holding
agent of the government,
withheld and remitted to
the BIR the 15% final tax
based on the gross royalty
Yes. The defense of prescription is available as against the 2004 tax credit.
payments. The withholding
Under Sec. 229 NIRC, the prescriptive period is 2 years reckoned from the
tax return was filed and tax Taxp
filing of the annual return (CIR v. TMX Sales, G.R. No. 83736, 15 January 1992;
remitted to the BIR on ayer'
CIR v. PhilAm Life, G.R. No. 105208, 29May 1995; CIR v. CTA, G.R. No. TAX
2 January 10 of the following s Refu
117254,21 January 1999). However, the 2005 claim has not yet prescribed REMEDI 2008
9 year. On April 10, 2007 DEF since its prescriptive period ends on January 11, 2008 while the claim was filed ES
rem nd
Corporation filed written edie
on April 10, 2007. The filing of the Petition for Review with the Tax Appeals on
claim for tax credit with the s
the 2005 Claim is premature (Sec. 57[A]NIRC). UP LAW COMPLEX &
BIR, arising from
PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
erroneously paid income
taxes covering the years
2004 and 2005. The
following day, DEF
Corporation filed a petition
for review with the court of
Tax Appeals involving the
tax credit claim for 2004
and 2005. a. As a BIR
lawyer handling the case,
would you raise the
defense of prescription in
your answer to the claim
 for tax credit? Explain. ( 4%
)

DEF Corporation is wholly

owned subsidiary of DEF,
Inc., California, USA.
Starting December 15,
2004, DEF Corporation paid
annual royalties to DEF, No. the BIR cannot raise the defense that DEF Corporation is not the proper
Inc., for the use of the party.
Taxp
latter's software, for which In CIR v. Procter & Gamble, G.R. No. 66838, 02 December 1991, the Court
ayer'
the former, as with holding ruled that a final withholding agent is a proper party “with sufficient legal TAX
3 s Refu
agent of the government, interest” because it will be liable in the event that the final income tax cannot REMEDI 2008
0 withheld and remitted to rem nd
be paid by the taxpayer (See also Philippine Guaranty Co. v. CIR and CTA, No. ES
edie
the BIR the 15% final tax L-22074, 30 April 1965).
s
based on the gross royalty UP LAW COMPLEX & PHILIPPINE ASSOCIATION
payments. The withholding OF LAW SCHOOLS
tax return was filed and tax
remitted to the BIR on
January 10 of the following
year. On April 10, 2007 DEF
Corporation filed written
 claim for tax credit with the
BIR, arising from
erroneously paid income
taxes covering the years
2004 and 2005. The
following day, DEF
Corporation filed a petition
for review with the court of
Tax Appeals involving the
tax credit claim for 2004
and 2005.

b. Can the BIR lawyer raise

the defense that DEF
Corporation is not the
proper party to file such
claim for tax credit?
Explain. ( 3% )
After examining the books
and records of EDS
Corporation, the 2004 final
assessment notice, showing
basic tax of P1,000,000
deficiency interest of Taxp
An assessment notice is a computation prepared by the BIR of the alleged
P400,000 and due date for ayer'
unpaid taxes, plus interests, penalties or surcharges, if any. However, an TAX Asse
3 payment of April 30, 2007, s
assessment notice must be accompanied by a demand letter from the BIR in REMEDI ssm 2008
1 but without the demand order to result in valid assessment (RR No. 12-99)UP LAW COMPLEX & ES
rem
ent
letter, was mailed and edie
PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
released by the BIR on April s
15, 2007. The registered
letter, containing the tax
assessment, was received
by the EDS Corporation on
April 25, 2007 . What is an
 assessment notice? What
are the requisites of a valid
assessment? Explain ( 3% )

After examining the books

and records of EDS
Corporation, the 2004 final
assessment notice, showing
basic tax of P1,000,000
deficiency interest of
P400,000 and due date for
payment of April 30, 2007,
but without the demand
Taxp
letter, was mailed and
I would raise the defense that there is no valid assessment because EDS ayer'
released by the BIR on April TAX Asse
3 Corporation did not receive a demand letter from the BIR. s
15, 2007. The registered REMEDI ssm 2008
2 letter, containing the tax UP LAW COMPLEX & PHILIPPINE ASSOCIATION rem
ES ent
OF LAW SCHOOLS edie
assessment, was received
s
by the EDS Corporation on
April 25, 2007.

As tax lawyer of EDS

Corporation, what legal
defense(s) would you
raised against the
assessment? Explain. ( 3%
).
 Pedro Manalo, A Filipino
citizen residing in Makati
City, owns a vacation house
and lot in San Francisco,
California, U.S.A, which he
acquired in 2000 for P15
million. On January 10,
2006 he sold said real
property to Juan Mayaman,
Taxa
another Filipino citizen
tion
residing in Quezon City, for
of
P20 million. On February 9,
The BIR officer correctly disallowed the resid
2006 Manalo filed the
credit of the final tax of P1.2 million ent
capital gains tax return and Taxa
against the net income tax, which is citiz
paid P1.2 million tion
subject to deductions. However, the ens,
representing 6% capital of
assessment of 35% is incorrectly Income non-
3 gain tax. Since Manalo did Capi
imposed. The correct rate is based on Taxatio resid 2008
3 not derive any ordinary the 5-32% tax scale which is applicable n ent
tal
income, no income tax Gain
to individuals (Sec.24[D1] and Sec. citiz
returnn was filed by him for s
42[A5] NIRC). ens,
2006. After the tax audit Tax
UP LAW COMPLEX & PHILIPPINE ASSOCIATION and
conducted in 2007, the BIR
OF LAW SCHOOLS resid
officer assessed Manalo for
ent
deficiency income tax
alien
computed as follows: P5
s
million ( P20 million less P
15 million ) x 35% = P1.75
million, without the capital
gains tax paid being
allowed as tax credit.
Manalo consulted a real
estate broker who said that
the P1.2 million capital
gains tax should be credited
 from P1.75 million
deficiency income tax.

Is the BIR officer's tax

assessment correct?
Explain. ( 3% )

Pedro Manalo, A Filipino

Taxa
citizen residing in Makati
tion
City, owns a vacation house
of
and lot in San Francisco,
resid
California, U.S.A, which he
ent
acquired in 2000 for P15 Taxa
citiz
million. On January 10, tion
ens,
2006 he sold said real of
I would advise him to demand theapplication of the 5-32% tax scaleinstead of Income non-
3 property to Juan Mayaman, Capi
the fixed rate of 35% whichapplies only to domestic corporations(Sec. 24[D1] Taxatio resid 2008
4 another Filipino citizen tal
NIRC). UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS n ent
residing in Quezon City, for Gain
citiz
P20 million. On February 9, s
ens,
2006 Manalo filed the Tax
and
capital gains tax return and
resid
paid P1.2 million
ent
representing 6% capital
alien
gain tax. Since Manalo did
s
not derive any ordinary
income, no income tax
returnn was filed by him for
2006. After the tax audit
conducted in 2007, the BIR
officer assessed Manalo for
deficiency income tax
computed as follows: P5
million ( P20 million less P
15 million ) x 35% = P1.75
million, without the capital
gains tax paid being
allowed as tax credit.
Manalo consulted a real
estate broker who said that
the P1.2 million capital
gains tax should be credited
from P1.75 million
deficiency income tax. If
you were hired by Manalo
as his tax consultant, what
advice would you give him
to protect his interest?
Explain. ( 3% )
 Maria Suerte, a Filipino
citizen, purchased a lot in
Makati City in 1980 at a
price of P1 million. Said
property has been leased to
MAS Corporation, a Esca
domestic corporation pe
engaged in manufacturing fro
paper products, owned 99% m
by Maria Suerte. In October taxa
2007, EIP Corporation, a tion
real estate developer, :
expressed its desire to buy Tax
the Makati property at its Avoi
fair market value P300 No. The exchange of the real estate property for the shares of stocks is dan
General Doct
million, payable as follows : considered as a legitimate tax avoidance scheme (Sec. 40 [C2b] NIRC]. The sale ce
Principl rines
3 (a) P60 million down of the shares of stocks of domestic corporation, which is a capital asset, is Exch
es OF in 2008
5 payment; and (b) balance, subject to final tax 5% on the first P100,000 and 10 % on the amount in excess
Taxatio Taxa
ang
payable equally in twenty of P100,000 (Sec. 24[C]NIRC]. UP LAW COMPLEX & PHILIPPINE e of
n tion
four (24) monthly ASSOCIATIONOF LAW SCHOOLS Real
consecutive installments. Pro
Upon the advice of a tax pert
lawyer, Maria Suerte y
exchanged her Makati and
property for shares of stock Shar
of MAS Corporation. A BIR es
ruling, confirming the tax- of
free exchange of property Stoc
for shares of stock, was k
secured from the BIR
National Office and a
Certificate Authorizing
Registration was issued by
the Revenue District Officer
(RDO) where the property
was located. Subsequently,
she sold her entire stock
holdings in MAS
Corporation to EIP
Corporation for P300
million. In view of the tax
advice, Maria Suerte paid
only the capital gains tax of
P29,895,000 ( P100,000 x
5% plus P298,900,00 x 10%
), instead of the corporate
income tax of P104,650,00 (
35% on P299 million gain
from sale of real property ).
After evaluating the capital
gains tax payment, the RDO
wrote a letter to Maria
Suerte, Slating that she
commited tax evasion. Is
the contention of the RDO
tenable? Or was it tax
avoidance that Maria
Suerte had resorted to?
Explain. ( 6% )
 Jessie brought into the
Philippines a foreign-made
luxury car, and paid less
than the actual taxes and
duties due. Due to the
discrepancy, the Bureau of
Customs instituted seizure
proceedings and issued a
warrant of seizure and
detention. The car, then
parked inside a pay parking The criminal complaint is bereft ofmerit. The issuance of a warrant ofseizure
garage, was seized and and detention by the Collector ofCustoms for goods released contrary tolaw,
brought by government as when there is underpayment oftaxes and duties, is his primary andexclusive Tariff Gov
Rem
agents to a government jurisdiction and precludes thejudge of regular courts form takingcognizance of and ern
1 edie 2009
impounding facility. The the subject matter.Accordingly, what was done by theCollector could not be a Custom men
s
Collector of Customs basis of aprosecution for the usurpation of judicialfunctions (Commissioner v. s t
denied Jessie's request for Navarro, 77SCRA 264 (1977)). UP LAW COMPLEX & PHILIPPINE
the withdrawal of the ASSOCIATIONOF LAW SCHOOLS
warrant.Aggrieved, Jessie
filed against the Collector a
criminal complaint for
usurpation of judicial
functions on the ground
that only a judge may issue
a warrant of search and
seizure. Resolve with
reasons Jessie's criminal
complaint. (4%)
 Jessie brought into the
Philippines a foreign-made
luxury car, and paid less
than the actual taxes and
duties due. Due to the
discrepancy, the Bureau of
Customs instituted seizure
proceedings and issued a
warrant of seizure and
detention. The car, then
parked inside a pay parking
garage, was seized and
No. The luxury car being in a dwelling
brought by government
house, cannot be seized by officers of
agents to a government
the Bureau of Customs exercising police Tariff Gov
impounding facility. The Rem
authority without a search warrant and ern
2 Collector of Customs edie 2009
issued by a judge of a competent court Custom men
denied Jessie's request for s
(Sec 2209, TCC; Pacis v. Pamaran, 56 s t
the withdrawal of the
SCRA 16 (1974)). UP LAW COMPLEX & PHILIPPINE ASSOCIATION
warrant.Aggrieved, Jessie
OF LAW SCHOOLS
filed against the Collector a
criminal complaint for
usurpation of judicial
functions on the ground
that only a judge may issue
a warrant of search and
seizure. Would your
answer be the same if the
luxury car was seized while
parked inside the garage of
Jessie's residence? Why or
why not? (4%)
 The Sangguniang Bayan of
the Municipality of
Sampaloc, Quezon, passed
an ordinance imposing a
storage fee of ten centavos
(P0.10) for every 100 kilos
of copra deposited in any
bodega within the
Yes. The municipality is authorized toimpose reasonable fees and charges as
Municipality's jurisdiction.
aregulatory measure in an amountcommensurate with the cost ofregulations, Spec fees
The Metropolitan
inspection and licensing(Sec 147, LGC). In the case at bar, thestorage of copra ific and
Manufacturing Corporation
in any warehouse withinthe municipality can be the propersubject of taxin cha
(MMC), with principal office
regulation pursuant to thepolice power granted to municipalitiesunder the g nge
in Makati, is engaged in the Local
Revised Administrative Codeof the “general welfare clause.” Awarehouse used pow s for
manufacture of soap, edible Govern
for keeping or storingcopra is an establishment likely toendanger the public er of regu
3 oil, margarine, and other ment 2009
safety or likely togave rise to conflagration because the oilcontent of the Local latio
coconut oil-based products. Taxatio
copra, when ignited, isdifficult to put under control by waterand the use of Gove n
It has a warehouse in n
chemicals is necessary toput out the fire. It is, thus, reasonablethat the rnm and
Sampaloc, Quezon, used as
Municipality impose storagefees for its own surveillance and lookout(Procter ent lice
storage space for the copra
& Gamble PhilippineManufacturing Corporation v.Municipality of Jagna, Unit nsin
purchased in Sampaloc and
Province ofBohol, 94 SCRA 894 (1979)) UP LAW COMPLEX & PHILIPPINE s g
nearby towns before the
ASSOCIATIONOF LAW SCHOOLS
same is shipped to Makati.
MMC goes to court to
challenge the validity of the
ordinance, demanding the
refund of the storage fees it
paid under protest.Is the
ordinance valid? Explain
your answer. (4%)
 Republic Power
Corporation (RPC) is a
government-owned and
controlled corporation
engaged in the supply,
generation and
transmission of electric
power. In 2005, in order to
provide electricity to
Southern Tagalog
provinces, RPC entered into
an agreement with Jethro No, the contention of JEC is not correct.The owner of the power barges is
Energy Corporation (JEC), JECwhich is required to operate, manageand maintain the power barges for exe
for the lease of JEC's power thepurpose of converting the fuel of RPC into electricity. This belies the mpt
Impo
barges which shall be claimthat RPC, a government-owned andcontrolled corporation engaged in ion
Real sitio
berthed at the port of thesupply, generation and transmission ofelectric power, is the actual, direct fro
Propert n of
Batangas City. The contract andexclusive user of the barge, hence, doesnot fall within the purview of m
4 y Real 2009
provides that JEC shall own theexempting provision of Sec 234(c) of RA7160. Likewise, the argument that real
Taxatio Prop
the power barges and the RPCshould be liable to the real propertytaxes consonant with the contract pro
n erty
fixtures, fittings, machinery, isdevoid of merit. The liability for thepayment of the real estate taxes pert
Tax
and equipment therein, all isdetermined by law and not by theagreement of the parties (FELS EnergyInc. y
of which JEC shall supply at v. The Province of Batangas, 516SCRA 186 (2007)). UP LAW COMPLEX & tax
its own cost, and that JEC PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
shall operate, manage and
maintain the power barges
for the purpose of
converting the fuel of RPC
into electricity. The
contract also stipulates that
all real estate taxes and
assessments, rates and
other charges, in respect of
the power barges, shall be
for the account of RPC.In
2007, JEC received an
assessment of real property
taxes on the power barges
from the Assessor of
Batangas City. JEC sought
reconsideration of the
assessment on the ground
that the power barges are
exempt from real estate
taxes under Section 234 [c]
of R.A. 7160 as they are
actually, directly and
exclusively used by RPC, a
government-owned and
controlled corporation.
Furthermore, even
assuming that the power
barges are subject to real
property tax, RPC should be
held liable therefor, in
accordance with the terms
of the lease agreement. Is
the contention of JEC
correct? Explain your
answer. (4%)
 False. Congress can pass a law taxingincome of religious institutions from Exe
A law imposing a tax on itsproperty or activities used for profit butnot for their income from exercise nmp
Gros
income of religious ofreligious activities. The imposition of atax on income of a religious Income t
s
5 institutions derived from institutionfrom sale of religious articles is aninfringement of religious freedom Taxatio Cor 2009
Inco
the sale of religious articles whichis not allowed under the fundamentallaw (American Bible Society v. City n pora
me
is valid. True or False ofManila, 101 Phil. 385 (1957)). UP LAW COMPLEX & PHILIPPINE tion
ASSOCIATIONOF LAW SCHOOLS s

Melissa inherited from her

father a 300-square-meter
Taxa
lot. At the time of her
tion
father's death on March 14,
of
1995, the property was
resid
valued at P720,000.00. On
Yes. The capital gains tax is 6% of the ent
February 28, 1996, to
higher value between the selling price citiz Taxa
defray the cost of the
(P600,000.00) and fair market value of ens, tion
medical expenses of her
the real property (P900,000.00) or a tax Income non- of
sick son, she sold the lot for
6 in the amount if P54,000.00. The capital Taxatio resid capi 2009
P600,000.00, on cash basis.
gains tax is due on the sale if a real n ent tal
The prevailing market value
property classified as a capital asset (Sec citiz gain
of the property at the time
24(d)(1), NIRC). UP LAW COMPLEX & PHILIPPINE ASSOCIATION ens, s
of the sale was P3,000.00
OF LAW SCHOOLS and
per square meter. Is
resid
Melissa liable to pay capital
ent
gains tax on the
alien
transaction? If so, how
s
much and why? If not, why
not? (4%)
 Kenya International Airlines
(KIA) is a foreign
corporation, organized
under the laws of Kenya. It
is not licensed to do
business in the Philippines.
Its commercial airplanes do
not operate within
Philippine territory, or
Taxa
service passengers
tion
embarking from Philippine
of
airports. The firm is
resid
represented in the No, KIA’s position is not tenable. The revenue it derived in 1997 from sales of
ent
Philippines by its general airplane tickets in the Philippines, subject 35% tax based on its taxable income
citiz
agent, Philippine Airlines pursuant to Sec 25 (a)(1) of the Tax Code of 1997. The transacting of business
ens,
(PAL), a Philippine in the Philippines through its local sales agent, makes KIA a resident foreign
Income non- Gen
corporation.KIA sells corporation despite the absence of landing rights, thus, it is taxable on income
7 Taxatio resid eral 2009
airplane tickets through derived within. The source of an income is the property, activity, or the instant
n ent Rule
PAL, and these tickets are case it is the sale of the tickets in the Philippines which is the activity that
citiz
serviced by KIA airplanes produced the income. KIA’s income being derived from within is subject to
ens,
outside the Philippines. The Philippine income tax. UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW
and
total sales of airline tickets SCHOOLS
resid
transacted by PAL for KIA in
ent
1997 amounted to
alien
P2,968,156.00. The
s
Commissioner of Internal
Revenue assessed KIA
deficiency income taxes at
the rate of 35% on its
taxable income, finding that
KIA's airline ticket sales
constituted income derived
from sources within the
Philippines.KIA filed a
protest on the ground that
the P2,968,156.00 should
be considered as income
derived exclusively from
sources outside the
Philippines since KIA only
serviced passengers outside
Philippine territory.Is the
position of KIA tenable?
Reasons. (4%)
 Raffy and Wena, husband
and wife,are both
employed by XXX
Corporation.After office
hours, they jointly manage
acoffee shop at the ground
floor of theirhouse. The
coffee shop is registered in
thename of both spouses.
Which of thefollowing is the
correct way to preparetheir
income tax return? Write
the letteronly. DO NOT
EXPLAIN YOUR
ANSWER.(2%)a. Raffy will Exclu Excl
declare as his incomethe ded ude
Income
salaries of both spouses, in d in
8 D. UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS Taxatio 2009
whileWena will declare the the the
n
income fromthe coffee sylla sylla
shop.b. Wena will declare bus bus
the combinedcompensation
income of thespouses, and
Raffy will declare
theincome from the coffee
shop.c. All the income will
be declared byRaffy alone,
because only
oneconsolidated return is
required tobe filed by the
spouses.d. Raffy will
declare his
owncompensation income
and Wenawill declare hers.
The incomefrom the coffee
shop shall beequally
divided between them.Each
spouse shall be
taxedseparately on
theircorresponding taxable
income tobe covered by
one consolidatedreturn for
the spouses.e. Raffy will
declare his
owncompensation income
and Wenawill declare hers.
The income fromthe coffee
shop shall be
equallydivided between
them. Raffy willfile one
income tax return to
coverall the income of both
spouses,and the tax is
computed on theaggregate
taxable income of
thespouses
 YYY Corporation engaged
the services of the
Test
Manananggol Law Firm in
s in
2006 to defend the
dete
corporation's title over a
rmi
property used in the
ning
business. For the legal
whe
services rendered in 2007, No. The expense is deductible in the year it complies with the all-events test.
ther
the law firm billed the The test is considered met if the liability is fixed, and the amount such liability
Income inco
corporation only in 2008. to pay is already fixed in 2007 when the services were rendered, and the Inco
9 Taxatio me 2009
The corporation duly paid. amount of such liability is determinable with reasonable accuracy in the same me
n is
YYY Corporation claimed year. Hence the deduction should have been claimed in 2007 and not in 2008.
earn
this expense as a deduction UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
ed
from gross income in its
for
2008 return, because the
tax
exact amount of the
pur
expense was determined
pos
only in 2008. Is YYY's claim
es
of deduction proper?
Reasons. (4%)
Ernesto, a Filipino citizen
and a practicing lawyer,
filed his income tax return
Ded
for 2007 claiming optional
ucti
standard deductions. No. Since Ernesto has elected to claim
on
Realizing that he has optional standard deduction, said Gros
Income fro
1 enough documents to election is irrevocable for the taxable s
Taxatio m 2009
0 substantiate his profession- year for which the return is made (Sec Inco
n Gro
connected expenses, he 34(L), NIRC). UP LAW COMPLEX & PHILIPPINE ASSOCIATION me
ss
now plans to file an OF LAW SCHOOLS
Inco
amended income tax return
me
for 2007, in order to claim
itemized deductions, since
no audit has been
 commenced by the BIR on
the return he previously
filed. Will Ernesto be
allowed to amend his
return? Why or why not?
(4%)

Johnny transferred a
valuable 10-door
commercial apartment to a
designated trustee, Miriam,
naming in the trust
I will advise the trustee that she has
instrument Santino,
nothing to pay in annual income taxes
Johnny's 10-year old son, as
because the trust’s taxable income is
the sole beneficiary. The Kind
zero. This is so because the amount of
trustee is instructed to Income Inco s of
1 income to be distributed annually to the
distribute the yearly rentals Taxatio me taxp 2009
1 beneficiary is a deduction from the gross
amounting to P720,000.00. n Tax ayer
income of the trust but must be reported
The trustee consults you if s
as income of the beneficiary (Sec 61(A),
she has to pay the annual
NIRC). UP LAW COMPLEX & PHILIPPINE ASSOCIATION
income tax on the rentals
OF LAW SCHOOLS
received from the
commercial
apartment.What advice will
you give the trustee?
Explain. (3%)
 Johnny transferred a
valuable 10-door
commercial apartment to a
designated trustee, Miriam,
naming in the trust
instrument Santino,
Johnny's 10-year old son, as
the sole beneficiary. The
trustee is instructed to
distribute the yearly rentals No. The trustee has to pay the incometax in the trust’s net income
Kind
amounting to P720,000.00. determinedannually is the income is required to beaccumulated. Once a
Income Inco s of
1 The trustee consults you if taxable trust isestablished, its net income is eithertaxable to the trust,
Taxatio me taxp 2009
2 she has to pay the annual represented by thetrustee, or to the beneficiary dependingon the provision
n Tax ayer
income tax on the rentals for distribution ofincome following the one-layer taxationscheme (Sec 61 (A),
s
received from the NIRC). UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
commercial apartment. Will
your advice be the same if
the trustee is directed to
accumulate the rental
income and distribute the
same only when the
beneficiary reaches the age
of majority? Why or why
not? (3%)
 Masarap Food Corporation
No. The protection of taxpayer’s brand
(MFC) incurred substantial
franchise is analogous to the
advertising expenses in Ded
maintenance of goodwill or title to one’s
order to protect its brand ucti
property which is in the nature of a
franchise for one of its line on
capital expenditure. An advertising Gros
products. In its income tax Income fro
1 expense as, of such nature does not s
return, MFC included the Taxatio m 2009
3 advertising expense as qualify as an ordinary business expense, Inco
n Gro
because the benefit to be enjoyed by the me
deduction from gross ss
taxpayer goes beyond one taxable year
income, claiming it as an Inco
(CIR v. General Foods Inc., 401 SCRA
ordinary business expense. me
545 (2003)).UP LAW COMPLEX & PHILIPPINE ASSOCIATION
Is MFC correct? Explain.
OF LAW SCHOOLS
(3%)
Miguel, a citizen and
resident of Mexico,
donated US$1,000.00
worth of stocks in Barack
Motors Corporation, a
Mexican company, to his
Miguel, a non-resident alien, is not Class
legitimate son, Miguelito, Dow
allowed any dowry exclusion. The dowry ificat
who is residing in the ry
1 applies only to a donor who is either a Donor’s ion
Philippines and about to be Excl 2009
4 citizen or resident of the Philippines Tax of
married to a Filipino usio
(Sec 101(A)(1), NIRC). UP LAW COMPLEX & PHILIPPINE ASSOCIATION Don
girlfriend. Mexico does not n
OF LAW SCHOOLS or
impose any transfer tax of
whatever nature on all
gratuitous transfers of
property. Is Miguel entitled
to claim a dowry exclusion?
Why or why not? (3%)
 Miguel, a citizen and
resident of Mexico,
donated US$1,000.00
worth of stocks in Barack
Motors Corporation, a Cov
Mexican company, to his erag
No. The donation is not subject to thePhilippine donor’s tax because the
legitimate son, Miguelito, e of
donoris non-resident alien and the propertydonated is a property not situated Class
who is residing in the Don
in thePhilippines. The rule of reciprocityapplies only if the property ificat
Philippines and about to be or's
1 transferredby a non-resident alien is an intangiblepersonal property situated Donor’s ion
married to a Filipino Tax 2009
5 in thePhilippines. This is designed toreciprocate the exemption from Tax of
girlfriend. Mexico does not (rul
donor’stax granted by a foreign country toFilipinos who are not residing Don
impose any transfer tax of e of
thereat.(Sec 104, NIRC) UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW or
whatever nature on all reci
SCHOOLS
gratuitous transfers of proc
property. Is Miguel entitled ity)
to the rule of reciprocity in
order to be exempt from
the Philippine donor's tax?
Why or why not? (3%)
In 1999, Xavier purchased Pro
from his friend, Yuri, a pert
painting for P500,000.00. y
Yes. The transmission of the property Item
The fair market value (FMV) pass
from Xavier to Zandro is subject to the s to
of the painting at the time ing
estate tax because this is a property be
of the purchase was P1- und
within Xavier’s control to dispose upon inclu
million. Yuri paid all the er
1 his death. The composition of the gross Estate ded
corresponding taxes on the the 2009
6 estate pertains to properties owned and Tax in
transaction. In 2001, Xavier Gen
existing as of the time of death and to be transferred by the owner by death gros
died. In his last will and eral
(Sec s
testament, Xavier pow
85, NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATION estat
bequeathed the painting, er
OF LAW SCHOOLS e
already worth P1.5-million, of
to his only son, Zandro. The app
will also granted Zandro the oint
 power to appoint his wife, men
Wilma, as successor to the t
painting in the event of
Zandro's death. Zandro died
in 2007, and Wilma
succeeded to the property.
Should the painting be
included in the gross estate
of Xavier in 2001 and thus,
be subject to estate tax?
Explain. (3%)
In 1999, Xavier purchased
from his friend, Yuri, a
painting for P500,000.00.
Tran
The fair market value (FMV)
smis
of the painting at the time
sion
of the purchase was P1- Exe
fro
million. Yuri paid all the mpti
m
corresponding taxes on the on
first
transaction. In 2001, Xavier of
No. The transmission from the first heir,legatee or donee in favor of heir
died. In his last will and certa
anotherbeneficiary, in accordance with thedesire of the predecessor is an or
testament, Xavier in
1 exempttransfer (Sec 87, NIRC). Zandro has nocontrol over the disposition of Estate don
bequeathed the painting, acqu 2009
7 already worth P1.5-million, theproperty at the time of his death; hence,the estate tax which imposed Tax ee
isitio
theprivilege of transmitting properties uponhis death will not apply. UP LAW in
to his only son, Zandro. The ns
COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS favo
will also granted Zandro the and
r of
power to appoint his wife, trans
anot
Wilma, as successor to the missi
her
painting in the event of ons
ben
Zandro's death. Zandro died
efici
in 2007, and Wilma
ary
succeeded to the property.
Should the painting be
included in the gross estate
 of Zandro in 2007 and thus,
be subject to estate tax?
Explain. (3%)

In 1999, Xavier purchased

from his friend, Yuri, a
Vanishing deduction shall be allowed to
painting for P500,000.00.
the estate of Xavier but only to the
The fair market value (FMV)
extent of ½ of the property which is the
of the painting at the time
portion acquired by gifts (Sec 100,
of the purchase was P1-
NIRC). The donation took place within 5
million. Yuri paid all the
years (1999 to 2001) from the death of
corresponding taxes on the
Xavier; hence, there is a vanishing
transaction. In 2001, Xavier Ded Vani
deduction. However, Zandro’s estate will
died. In his last will and uctio shin
not be entitled to claim because, first
1 testament, Xavier Estate ns g
and foremost, the property previously 2009
8 bequeathed the painting, taxed is not includable in his gross
Tax from Ded
already worth P1.5-million, Estat ucti
estate and second, even if it is
to his only son, Zandro. The e on
includable, the present decedent died
will also granted Zandro the
more than 5 years from the death of the
power to appoint his wife,
previous decedent, and that a vanishing
Wilma, as successor to the
deduction is already claimed by the
painting in the event of
previous estate involving the same
Zandro's death. Zandro died
property. UP LAW COMPLEX & PHILIPPINE ASSOCIATION
in 2007, and Wilma
OF LAW SCHOOLS
succeeded to the property.
May a vanishing deduction
be allowed in either or both
of the estates? Explain.
(3%)
 A taxpayer received an
assessment notice from the
BIR on February 3, 2009.
The following day, he filed a
protest, in the form of a
request for reinvestigation,
The remedy of a taxpayer is to avail ofeither of two options:1. File a petition
against the assessment and
for review withthe CTA within 30 days after the expiration of the 180- Taxp
submitted all relevant
dayperiod from submission of allrelevant documents; or2. Await the final ayer'
documents in support of TAX Asse
1 decision of theCommissioner on the disputedassessment and appeal suchfinal s
the protest. On September REMEDI ssm 2009
8 decision to the CTAwithin 30 days after receipt ofa copy of such rem
11, 2009, the taxpayer, ES ent
decision.These options are mutually exclusivesuch that resort to one bars edie
apprehensive because he
theapplication of the other (RCBC v. CIR,522 SCRA 144 (2007)). UP LAW s
had not yet received notice
COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
of a decision by the
Commissioner on his
protest, sought your
advice.What remedy or
remedies are available to
the taxpayer? Explain. (4%)
In 1999, Xavier purchased Pro
from his friend, Yuri, a pert
painting for P500,000.00. y
Yes. The transmission of the property Item
The fair market value (FMV) pass
from Xavier to Zandro is subject to the s to
of the painting at the time ing
estate tax because this is a property be
of the purchase was P1- und
within Xavier’s control to dispose upon inclu
million. Yuri paid all the er
1 his death. The composition of the gross Estate ded
corresponding taxes on the the 2009
9 estate pertains to properties owned and Tax in
transaction. In 2001, Xavier Gen
existing as of the time of death and to be transferred by the owner by death gros
died. In his last will and eral
(Sec s
testament, Xavier pow
85, NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATION estat
bequeathed the painting, er
OF LAW SCHOOLS e
already worth P1.5-million, of
to his only son, Zandro. The app
will also granted Zandro the oint
 power to appoint his wife, men
Wilma, as successor to the t
painting in the event of
Zandro's death. Zandro died
in 2007, and Wilma
succeeded to the property.
Should the painting be
included in the gross estate
of Xavier in 2001 and thus,
be subject to estate tax?
Explain. (3%)
ABCD Corporation (ABCD) is
a domestic corporation
with individual and
corporate shareholders
who are residents of the
United States. For the
2nd quarter of 1983, these
U.S.-based individual and
corporate stockholders Yes, The provision of a treaty must take precedence over and above the
received cash dividends provisions of the local taxing statute consonant with the principle of General Doct
from the corporation. The international comity. Tax treaties are accepted limitations to the power of Principl rines Tax
1
corresponding withholding taxation. Thus, the CTA could apply the treaty provision so that the claim for es OF in trea 2009
9 tax on dividend income --- refund representing the difference between the amount actually withheld and Taxatio Taxa ties
30% for individual and 35% paid to the BIR and the amount due and payable under the treaty, should be n tion
for corporate non-resident granted. UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
stockholders --- was
deducted at source and
remitted to the BIR.On May
15, 1984, ABCD filed with
the Commissioner of
Internal Revenue a formal
claim for refund, alleging
that under the RP-US Tax
 Treaty, the deduction
withheld at source as tax on
dividends earned was fixed
at 25% of said income.
Thus, ABCD asserted that it
overpaid the withholding
tax due on the cash
dividends given to its non-
resident stockholders in the
U.S. The Commissioner
denied the claim.On
January 17, 1985, ABCD
filed a petition with the
Court of Tax Appeals (CTA)
reiterating its demand for
refund. Is the contention of
ABCD Corporation correct?
Why or why not? (3%)
In 1999, Xavier purchased Tran
from his friend, Yuri, a smis
Exe
painting for P500,000.00. sion
No. The transmission from the first heir, mpti
The fair market value (FMV) fro
legatee or donee in favor of another on
of the painting at the time m
beneficiary, in accordance with the of
of the purchase was P1- first
desire of the predecessor is an exempt certa
million. Yuri paid all the heir
transfer (Sec 87, NIRC). Zandro has no in
2 corresponding taxes on the Estate or
control over the disposition of the acqu 2009
0 transaction. In 2001, Xavier property at the time of his death; hence,
Tax
isitio
don
died. In his last will and ee
the estate tax which imposed the ns
testament, Xavier in
privilege of transmitting properties upon and
bequeathed the painting, favo
his death will not apply. UP LAW COMPLEX & PHILIPPINE ASSOCIATION trans
already worth P1.5-million, r of
OF LAW SCHOOLS missi
to his only son, Zandro. The anot
ons
will also granted Zandro the her
power to appoint his wife, ben
Wilma, as successor to the efici
painting in the event of ary
Zandro's death. Zandro died
in 2007, and Wilma
succeeded to the property.
Should the painting be
included in the gross estate
of Zandro in 2007 and thus,
be subject to estate tax?
Explain. (3%)
 The inherent limitations on the power totax are:1. Taxation is for public
purpose. – Theproceeds of the tax must be used (a)for the support of the
State or (b) forsome recognized objective of thegovernment or to directly
promotethe welfare of the community.2. Taxation is inherently legislative.
Only the legislature has the fulldiscretion as to the persons,property,
occupation or business tobe axed provided these are all withinthe State’s
territorial jurisdiction. ITcan also finally determine theamount or rate of tax, Scop Inhe
the kind of taxto be imposed and the method ofcollection (1 Cooley 176- e rent
General
Enumerate the four (4) 184).3. Taxation is territorial- Taxation maybe exercised only within and Limi
Principl
2 inherent limitations on theterritorial jurisdiction, the taxingauthority (61 Am. Jur. 88). Withinthe Limit tati
es OF 2009
0 taxation. Explain each item territorial jurisdiction, the taxingauthority may determine the “placeof
Taxatio
ation ons
briefly. (4%) taxation” or “tax situs”.4. Taxation is subject to internationalcomity. – This is a of of
n
limitation which isfounded on reciprocity designed tomaintain harmonious Taxa Taxa
and productiverelationships among the variousstate. Under international tion tion
comity, astate must recognize the generallyaccepted tenets of international
law,among which are the principles ofsovereign equality among states andof
their freedom from suit withouttheir consent, that limits thatauthority of a
government toeffectively impose taxes in asovereign state and
itsinstrumentalities,, as well as in its property held, and activitiesundertaken in
that capacity. UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
 In 1999, Xavier purchased
from his friend, Yuri, a
painting for P500,000.00.
The fair market value (FMV)
of the painting at the time
of the purchase was P1-
million. Yuri paid all the
corresponding taxes on the
Vanishing deduction shall be allowed tothe estate of Xavier but only to
transaction. In 2001, Xavier
theextent of ½ of the property which is theportion acquired by gifts (Sec
died. In his last will and
100,NIRC). The donation took place within 5years (1999 to 2001) from the Ded Vani
testament, Xavier
death ofXavier; hence, there is a vanishingdeduction. However, Zandro’s uctio shin
bequeathed the painting,
2 estate willnot be entitled to claim because, firstand foremost, the property Estate ns g
already worth P1.5-million, 2009
1 previouslytaxed is not includable in his grossestate and second, even if it Tax from Ded
to his only son, Zandro. The
isincludable, the present decedent diedmore than 5 years from the death of Estat ucti
will also granted Zandro the
theprevious decedent, and that a vanishingdeduction is already claimed by e on
power to appoint his wife,
theprevious estate involving the sameproperty. UP LAW COMPLEX &
Wilma, as successor to the
PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
painting in the event of
Zandro's death. Zandro died
in 2007, and Wilma
succeeded to the property.
May a vanishing deduction
be allowed in either or both
of the estates? Explain.
(3%)
False. Tax is a pecuniary burden payable in money, but backpay certificates General How
Stag
A law that allows taxes to may be used in payment of tax. (Borja v. Gella, 8 SCRA 602) The taxpayer is Principl taxe
2 es of
be paid either in cash or in not allowed to settle his tax liability by conveying property (real or personal) in es OF s 2009
1 kind is valid. True or False Taxa
view of the problem of assigning value to such property. REVIEWER ON Taxatio are
tion
TAXATION - MAMALATEO n paid
 In 1999, Xavier purchased
from his friend, Yuri, a
painting for P500,000.00.
The fair market value (FMV)
of the painting at the time
Pro
of the purchase was P1-
pert
million. Yuri paid all the
y
corresponding taxes on the
pass
transaction. In 2001, Xavier Yes. The transmission of the property Item
ing
died. In his last will and from Xavier to Zandro is subject to the s to
und
testament, Xavier estate tax because this is a property be
er
bequeathed the painting, within Xavier’s control to dispose upon inclu
the
2 already worth P1.5-million, his death. The composition of the gross Estate ded
Gen 2009
2 to his only son, Zandro. The estate pertains to properties owned and Tax in
eral
will also granted Zandro the existing as of the time of death and to be transferred by the owner by death gros
pow
power to appoint his wife, (Sec s
er
Wilma, as successor to the 85, NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATION estat
of
painting in the event of OF LAW SCHOOLS e
app
Zandro's death. Zandro died
oint
in 2007, and Wilma
men
succeeded to the property.
t
Should the painting be
included in the gross estate
of Xavier in 2001 and thus,
be subject to estate tax?
Explain. (3%)
 In 1999, Xavier purchased
from his friend, Yuri, a
painting for P500,000.00.
The fair market value (FMV)
of the painting at the time Tran
of the purchase was P1- smis
million. Yuri paid all the sion
Exe
corresponding taxes on the fro
mpti
transaction. In 2001, Xavier m
on
died. In his last will and first
of
testament, Xavier No. The transmission from the first heir,legatee or donee in favor of heir
certa
bequeathed the painting, anotherbeneficiary, in accordance with thedesire of the predecessor is an or
in
2 already worth P1.5-million, exempttransfer (Sec 87, NIRC). Zandro has nocontrol over the disposition of Estate don
acqu 2009
3 to his only son, Zandro. The theproperty at the time of his death; hence,the estate tax which imposed Tax
isitio
ee
will also granted Zandro the theprivilege of transmitting properties uponhis death will not apply. UP LAW in
ns
power to appoint his wife, COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS favo
and
Wilma, as successor to the r of
trans
painting in the event of anot
missi
Zandro's death. Zandro died her
ons
in 2007, and Wilma ben
succeeded to the property. efici
Should the painting be ary
included in the gross estate
of Zandro in 2007 and thus,
be subject to estate tax?
Explain. (3%)
 In 1999, Xavier purchased
from his friend, Yuri, a
painting for P500,000.00.
The fair market value (FMV) Vanishing deduction shall be allowed to
of the painting at the time the estate of Xavier but only to the
of the purchase was P1- extent of ½ of the property which is the
million. Yuri paid all the portion acquired by gifts (Sec 100,
corresponding taxes on the NIRC). The donation took place within 5
transaction. In 2001, Xavier years (1999 to 2001) from the death of
died. In his last will and Xavier; hence, there is a vanishing
Ded Vani
testament, Xavier deduction. However, Zandro’s estate will
uctio shin
bequeathed the painting, not be entitled to claim because, first
2 Estate ns g
already worth P1.5-million, and foremost, the property previously 2009
4 Tax from Ded
to his only son, Zandro. The taxed is not includable in his gross
Estat ucti
will also granted Zandro the estate and second, even if it is
e on
power to appoint his wife, includable, the present decedent died
Wilma, as successor to the more than 5 years from the death of the
painting in the event of previous decedent, and that a vanishing
Zandro's death. Zandro died deduction is already claimed by the
in 2007, and Wilma previous estate involving the same
succeeded to the property. property. UP LAW COMPLEX & PHILIPPINE ASSOCIATION
May a vanishing deduction OF LAW SCHOOLS
be allowed in either or both
of the estates? Explain.
(3%)
 In 1999, Xavier purchased
from his friend, Yuri, a
painting for P500,000.00.
The fair market value (FMV)
of the painting at the time
Pro
of the purchase was P1-
pert
million. Yuri paid all the
y
corresponding taxes on the
pass
transaction. In 2001, Xavier Item
ing
died. In his last will and s to
und
testament, Xavier Yes. The transmission of the propertyfrom Xavier to Zandro is subject to be
er
bequeathed the painting, theestate tax because this is a propertywithin Xavier’s control to dispose inclu
the
2 already worth P1.5-million, uponhis death. The composition of the grossestate pertains to properties Estate ded
Gen 2009
5 to his only son, Zandro. The owned andexisting as of the time of death and to be transferred by the owner Tax in
eral
will also granted Zandro the by death (Sec85, NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW gros
pow
power to appoint his wife, SCHOOLS s
er
Wilma, as successor to the estat
of
painting in the event of e
app
Zandro's death. Zandro died
oint
in 2007, and Wilma
men
succeeded to the property.
t
Should the painting be
included in the gross estate
of Xavier in 2001 and thus,
be subject to estate tax?
Explain. (3%)
 In 1999, Xavier purchased
from his friend, Yuri, a
painting for P500,000.00.
The fair market value (FMV)
of the painting at the time Tran
of the purchase was P1- smis
million. Yuri paid all the sion
Exe
corresponding taxes on the fro
No. The transmission from the first heir, mpti
transaction. In 2001, Xavier m
legatee or donee in favor of another on
died. In his last will and first
beneficiary, in accordance with the of
testament, Xavier heir
desire of the predecessor is an exempt certa
bequeathed the painting, or
transfer (Sec 87, NIRC). Zandro has no in
2 already worth P1.5-million, Estate don
control over the disposition of the acqu 2009
6 to his only son, Zandro. The property at the time of his death; hence,
Tax
isitio
ee
will also granted Zandro the in
the estate tax which imposed the ns
power to appoint his wife, favo
privilege of transmitting properties upon and
Wilma, as successor to the r of
his death will not apply. UP LAW COMPLEX & PHILIPPINE ASSOCIATION trans
painting in the event of anot
OF LAW SCHOOLS missi
Zandro's death. Zandro died her
ons
in 2007, and Wilma ben
succeeded to the property. efici
Should the painting be ary
included in the gross estate
of Zandro in 2007 and thus,
be subject to estate tax?
Explain. (3%)
 In 1999, Xavier purchased
from his friend, Yuri, a
painting for P500,000.00.
The fair market value (FMV)
of the painting at the time
of the purchase was P1-
million. Yuri paid all the
corresponding taxes on the
Vanishing deduction shall be allowed tothe estate of Xavier but only to
transaction. In 2001, Xavier
theextent of ½ of the property which is theportion acquired by gifts (Sec
died. In his last will and
100,NIRC). The donation took place within 5years (1999 to 2001) from the Ded Vani
testament, Xavier
death ofXavier; hence, there is a vanishingdeduction. However, Zandro’s uctio shin
bequeathed the painting,
2 estate willnot be entitled to claim because, firstand foremost, the property Estate ns g
already worth P1.5-million, 2009
7 previouslytaxed is not includable in his grossestate and second, even if it Tax from Ded
to his only son, Zandro. The
isincludable, the present decedent diedmore than 5 years from the death of Estat ucti
will also granted Zandro the
theprevious decedent, and that a vanishingdeduction is already claimed by e on
power to appoint his wife,
theprevious estate involving the sameproperty. UP LAW COMPLEX &
Wilma, as successor to the
PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
painting in the event of
Zandro's death. Zandro died
in 2007, and Wilma
succeeded to the property.
May a vanishing deduction
be allowed in either or both
of the estates? Explain.
(3%)
Com
When the financial position
pro
of the taxpayer True. Financial incapacity is a ground
mise
demonstrates a clear allowed by law in order that the Com
TAX and
2 inability to pay the tax, the Commissioner of Internal Revenue may pro
REMEDI Abat 2009
8 Commissioner of Internal validly compromise a tax liability. (Sec
ES eme
mis
Revenue may validly 204, NIRC) UP LAW COMPLEX & PHILIPPINE ASSOCIATION e
nt of
compromise the tax OF LAW SCHOOLS
Taxe
liability. True or False
s
 The doctrine of equitable True. The doctrine arose from common law allowing offsetting of a prescribed
Taxp
recoupment allows a claim for refund against a tax liability arising from the same transaction on
ayer'
taxpayer whose claim for which an overpayment is made and underpayment is due. The doctrine finds TAX Coll
2 s
refund has prescribed to no applicable to cases where the taxes involved are totally unrelated, and REMEDI ecti 2009
9 offset tax liabilities with his rem
although it seems equitable, it is not allowed in our jurisdiction.UP LAW ES on
edie
claim of overpayment. True COMPLEX & PHILIPPINE ASSOCIATION
s
or False OF LAW SCHOOLS
False
,
Filin
frau
False. There is a different between afalse return and a fraudulent return. g of
dule
Thefirst merely implies a deviation from thetruth or fact whether intentional retu
A false return and a TAX nt,
3 or not,whereas the second is intentional anddeceitful with the aim of evading rn
fraudulent return are one REMEDI and 2009
0 and the same. True or False thecorrect tax due (Aznar v. Commissioner,GR NO. L-20569, Aug 23, 1974, 58 and
ES non-
SCRA519 (1974)). UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW pay
filing
SCHOOLS men
of
t
retur
ns
 ABCD Corporation (ABCD) is
a domestic corporation
with individual and
corporate shareholders
who are residents of the
United States. For the
2nd quarter of 1983, these
U.S.-based individual and
corporate stockholders
received cash dividends
from the corporation. The
corresponding withholding Yes. A withholding agent is not only an
tax on dividend income --- agent of the Government but is also an
30% for individual and 35% agent of the taxpayer/income earner.
for corporate non-resident Hence, ABCD is also an agent of the Taxp
stockholders --- was beneficial owner of the dividends with ayer'
TAX
3 deducted at source and respect to the actual payment of the tax s Refu
REMEDI 2009
1 remitted to the BIR.On May to the Government, such authority may
ES
rem nd
15, 1984, ABCD filed with reasonably be held to include the authority to file a claim for refund and edie
the Commissioner of to bring an action for recovery of such s
Internal Revenue a formal claim (CIR v. Procter & Gamble, 204
claim for refund, alleging SCRA 377, (1991)). UP LAW COMPLEX & PHILIPPINE ASSOCIATION
that under the RP-US Tax OF LAW SCHOOLS
Treaty, the deduction
withheld at source as tax on
dividends earned was fixed
at 25% of said income.
Thus, ABCD asserted that it
overpaid the withholding
tax due on the cash
dividends given to its non-
resident stockholders in the
U.S. The Commissioner
denied the claim.On
 January 17, 1985, ABCD
filed a petition with the
Court of Tax Appeals (CTA)
reiterating its demand for
refund. Does ABCD
Corporation have the legal
personality to file the
refund on behalf of its non-
resident stockholders? Why
or why not? (3%)

A final assessment notice

was issued by the BIR on
June 13, 2000, and received
by the taxpayer on June 15,
2000. The taxpayer
protested the assessment Taxp
on July 31, 2000. The ayer'
Yes. The protest was filed out of time,hence the CTA does not TAX Asse
3 protest was initially given s
acquirejurisdiction over the matter (CIR v. AtlasMining and Development Corp. REMEDI ssm 2009
2 due course, but was (2000)). UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS ES
rem
ent
eventually denied by the edie
Commissioner of Internal s
Revenue in a decision dated
June 15, 2005. The taxpayer
then filed a petition for
review with the Court of
Tax Appeals (CTA), but the
 CTA dismissed the same. Is
the CTA correct in
dismissing the petition for
review? Explain your
answer. (4%)

A final assessment notice

was issued by the BIR on
June 13, 2000, and received
by the taxpayer on June 15,
2000. The taxpayer
protested the assessment
on July 31, 2000. The
protest was initially given
No. The protest was filed out of time
due course, but was
and, therefore, did not suspend the
eventually denied by the
running of the prescriptive period for the Taxp
Commissioner of Internal
collection of the tax. Once the right to ayer'
Revenue in a decision dated TAX Coll
3 collect has prescribed, the Commissioner s
June 15, 2005. The taxpayer REMEDI ecti 2009
3 can no longer enforce collection of the rem
then filed a petition for ES on
tax liability against the taxpayer (CIR v. edie
review with the Court of
Atlas Mining and Development Corp. s
Tax Appeals (CTA), but the
(2000)). UP LAW COMPLEX & PHILIPPINE ASSOCIATION
CTA dismissed the same.
OF LAW SCHOOLS
Assume that the CTA's
decision dismissing the
petition for review has
become final. May the
Commissioner legally
enforce collection of the
delinquent tax? Explain.
(4%)
 Spec
ific
The business tax on contractors is a Tax
taxin
graduated annual fixed tax based on the on
g
What is the basis for the gross receipts for the preceding calendar Local vari
pow
computation of business year. However, when the gross receipts Govern ous
er of
1 tax on contractors under amount to P2 million or more, the ment type 2010
Local
the Local Government business tax on contractors is imposed Taxatio s of
Gove
Code? (2%) as a percentage tax at the rate of 50% of n busi
rnm
1% (Sec 143 (e), LGC) UP LAW COMPLEX & PHILIPPINE ASSOCIATION ness
ent
OF LAW SCHOOLS es
Unit
s
Spec
ific
taxin Tax
Retiring businesses under the LGC aretaxed in their gross sales or g on
Local
grossreceipts in the current year and not inthe preceding year. If the tax paid pow reitr
How are retiring businesses Govern
in thecurrent year is less than the tax due ongross sales or receipts of the er of eme
2 taxed under the Local ment 2010
currentyear, the difference shall be paid beforethe business is considered Local nt
Government Code? (2%) Taxatio
officiallyretired (Sec 145, LGC). UP LAW COMPLEX & PHILIPPINE Gove of
n
ASSOCIATIONOF LAW SCHOOLS rnm busi
ent ness
Unit
s
On May 15, 2009, La Manga Taxp
Trading Corporation ayer'
received a deficiency s Prot
The protest was filed on time. The Local
business tax assessment of rem est
taxpayer has the right to protest an Govern
P1,500,000.00 from the edie of
3 assessment within 60 days from receipt ment 2010
Pasay City Treasurer. On s Asse
thereof (Sec 195, LGC).UP LAW COMPLEX & PHILIPPINE ASSOCIATION Taxatio
June 30, 2009, the (Loc ssm
OF LAW SCHOOLS n
corporation contested the al ent
assessment by filing a Taxe
written protest with the s)
 City Treasurer. On October
10, 2009, the corporation
received a collection letter
from the City Treasurer,
drawing it to file on
October 25, 2009 an appeal
against the assessment
before the Pasay Regional
Trial Court (RTC).Was the
protest of the corporation
filed on time? Explain. (3%)
On May 15, 2009, La Manga
Trading Corporation
received a deficiency
The appeal was not filed on time. When
business tax assessment of
an assessment is protested, the treasurer
P1,500,000.00 from the
has 60 days within which to decide. The
Pasay City Treasurer. On
taxpayer has 30 days from receipt of the Taxp
June 30, 2009, the
denial of the protest or from the lapse of ayer'
corporation contested the
the 60-day period to decide whichever s Prot
assessment by filing a Local
comes first, otherwise the assessment rem est
written protest with the Govern
becomes conclusive and unappeallable. edie of
4 City Treasurer. On October ment 2010
Since no decision becomes conclusive s Asse
10, 2009, the corporation Taxatio
and unappeallable. Since no decision on (Loc ssm
received a collection letter n
the protest was made, the taxpayer al ent
from the City Treasurer,
should have appealed to the RTC within Taxe
drawing it to file on
30 days from the lapse of the period to s)
October 25, 2009 an appeal
decide the protest (Sec 195, LGC). UP LAW COMPLEX & PHILIPPINE
against the assessment
ASSOCIATION
before the Pasay Regional
OF LAW SCHOOLS
Trial Court (RTC). Was the
appeal with the Pasay RTC
filed on time? Explain. (3%)
 Ferremaro, Inc., a
manufacturer
ofhandcrafted shoes,
maintains its principaloffice
in Cubao, Quezon City. It
Twenty five percent (25%) of total salesor P2.5 million shall be taxed in
hasbranches/sales offices in
Cebuand 15% of total sales or P1.5 millionshall be taxed in Davao. For the Spec
Cebu and Davao.Its factory
remaining 60% sales amounting to P6million which are recorded in ific
is located in Marikina City
theprincipal office, 30% thereof or P1.8million is taxable in Quezon City taxin
wheremost of its workers
wherethe principal office is located and 70% orP4.2 million is taxable in g Situ
live. Its principal officein Local
Marikina Citywhere the factory is located.Under the law, pow s of
Quezon City is also a sales Govern
manufacturersmaintaining a branch or sales outletshall record the sale in the er of tax
5 office.Sales of finished ment 2010
branch orsales outlet making the sale and pay thetax in the city or Local coll
products for calendar Taxatio
municipality where thebranch or outlet is located. SinceFerremaro, Inc. Gove ecte
year2009 in the amount of n
maintains one factory,the sales recorded in the principal officeshall be rnm d
P10 million weremade at
allocated and 30% of said salesare taxable in the place where theprincipal ent
the following locations:i)
office is located while 70% istaxable in the place where the factory islocated Unit
Cebu branch 25%ii) Davao
(Sec. 150, LGC). UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW s
branch 15%iii) Quezon City
SCHOOLS
branch 60%Total
100%Where should the
applicable local taxes onthe
shoes be paid? Explain.
(3%)
 XYZ Shipping Corporation is
a branch of an international
shipping line with voyages
between Manila and the
West Coast of the U.S. The
company’s vessels load and
Com
unload cargoes at the Port Com
mon
of Manila, albeit it does not mon
Limi
have a branch or sales Limit
tati
office in Manila. All the bills ation
No, Manila cannot legally levy the 2%Gross Receipts Tax on the shipping Local ons
of lading and invoices are s on
line,because taxes on the gross receipts oftransportation contractors Govern on
issued by the branch office the
6 andpassengers or freight by hire andcommon carriers by air, land or water isa ment the 2010
in Makati which is also the taxin
limitation on the exercise of taxingpowers by local government units (Sec133 Taxatio taxi
company’s principal g
(j), LGC). UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS n ng
office.The City of Manila pow
pow
enacted an ordinance ers
ers
levying a 2% tax on gross of
of
receipts of shipping lines LGU
LGU
using the Port of
Manila.Can the City
Government of Manila
legally impose said levy on
the corporation? Explain.
(3%)
Excl
The all event test is a test applied in realization of income and expense by usio
accrual basis taxpayer. The test liability, to warrant the inclusion of the income Income ns
What is the "all events Inco
7 or expense in the gross income or deductions during the taxable year. UP LAW Taxatio fro 2010
test"? Explain briefly. (2%) me
COMPLEX & PHILIPPINE ASSOCIATION n m
OF LAW SCHOOLS esta
te
 The “immediacy test” is applied todetermine whether the accumulation
ofafter tax profits by a domestic orresident foreign corporation is really forthe Tim
Taxa
reasonable needs of the business.Under this test, the reasonable needs ofthe e
tion
business are construed to mean theimmediate needs of the business,including and
of
reasonably anticipated needs.The corporation should be able to provean Income Tran
What is the "immediacy dom
8 immediate need for the accumulationof earnings and profits, or the Taxatio sfer 2010
test"? Explain briefly. (2%) estic
directcorrelation of anticipated needs to suchaccumulation of profits to justify n of
corp
thesaid accumulation (Sec 3, RR No. 2-2001;Mertens, Law of Federal Pro
orati
IncomeTaxation, Vol. 7, Chapter 39, p. 103,cited in Manila Wine Merchants, pert
ons
Inc. v.CIR, G.R. No. L-26145, Feb. 20, 1984) UP LAW COMPLEX & PHILIPPINE ies
ASSOCIATIONOF LAW SCHOOLS
 Mirador, Inc., a domestic
corporation,filed its Annual
Income Tax Return for
itstaxable year 2008 on
April 15, 2009. In
theReturn, it reflected an
income taxoverpayment of
P1,000,000.00 andindicated
its choice to carry-over
theoverpayment as an
automatic tax creditagainst
its income tax liabilities
insubsequent years.On
April 15, 2010, it filed its
Excl
AnnualIncome Tax Return B It may claim as refund the amountof P500,000 representing its incometax
usio
for its taxable year overpayment for its taxable year2009. Since the taxpayer has optedto carry- Taxa
Income ns
2009reflecting a taxable over the P1 million overpaidincome tax for taxable year 2008,said option is ble
9 Taxatio fro 2010
loss and an income considered irrevocableand no application for cash refundshall be allowed for it Peri
n m
taxoverpayment for the (Sec 76, NIRC;CIR v. Bank of Philippine Island,G.R. No. 178490, July 7, 2009).UP od
esta
current year 2009 inthe LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
te
amount of P500,000.00 and
its incometax overpayment
for the prior year 2008
ofP1,000,000.00.In its 2009
Return, the
corporationindicated its
option to claim for refund
thetotal income tax
overpayment
ofP1,500,000.00Choose
which of the following
statements iscorrect.a.
Mirador, Inc. may claim as
refundthe total income tax
overpayment
ofP1,500,000.00 reflected
in itsincome tax return for
its taxableyear 2009;b. It
may claim as refund
theamount of
P500,000.00representing
its income taxoverpayment
for its taxable year2009; or
c. No amount may be
claimed asrefund.Explain
the basis of your
answer.(5%)
 Taxa
tion
of
resid
ent Tim
citiz e
Gains realized by the
ens, and
investor upon redemption
Income non- Tran
1 of shares of stock in a
True. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio resid sfer 2010
0 mutual fund company are
n ent of
exempt from income tax.
citiz Pro
True or False (1%)
ens, pert
and ies
resid
ent
alien
s
Excl
A corporation can claim
usio
the optional standard Gros
Income ns
1 deduction equivalent to s
False. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio fro 2010
1 40% of its gross sales or n
Inco
m
receipts, as the case may me
esta
be. True or False (1%)
te
Premium payment for
Tim
health insurance of an
e
individual who is an
and
employee in an amount of Gros
Income Tran
1 P2,500 per year may be s
False. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio sfer 2010
2 deducted from gross n
Inco
of
income if his gross salary me
Pro
per year is not more than
pert
P250,000. True or False
ies
(1%)
 The Tax Code allows an
individual taxpayer to pay
Excl
in two equal installments,
usio
the first installment to be Taxa
Income ns
1 paid at the time the return ble
True. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio fro 2010
3 is filed, and the second on n
Peri
m
or before July 15 of the od
esta
same year, if his tax due
te
exceeds P2,000. True or
False (1%)
Tim
e
An individual taxpayer can and
adopt either the calendar Income Inco Tran
1
or fiscal period for purposes False. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio me sfer 2010
4 of filing his income tax n Tax of
return. (1%) Pro
pert
ies
Det
ermi
nati
Taxa
The capitalization rules on
tion
may be resorted to by the of
of
BIR in order to compel Income Gro
1 dom
corporate taxpayers to True. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio ss 2010
5 declare dividends to their estic
n Esta
corp
stockholders regularly. True te
orati
or False (1%) and
ons
Net
Esta
te
 Det
ermi
nati
on
of
Gros
Informer’s reward is subject Income Gro
1 s
to a final withholding tax of True. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio ss 2010
6 10%. True or False (1%) Inco
n Esta
me
te
and
Net
Esta
te
Det
A non-resident alien who ermi
stays in the Philippines for nati
less than 180 days during on
the calendar year shall be of
Gros
entitled to personal Income Gro
1 s
exemption not to exceed False. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio ss 2010
7 Inco
the amount allowed to n Esta
me
citizens of the Philippines te
by the country of which he and
is subject or citizen. True or Net
False (1%) Esta
te
 A is a travelling salesman
working full time for Nu
Skin Products. He receives a
monthly salary plus 3%
commission on his sales in a
Det
Southern province where
ermi
he is based. He regularly
nati
uses his own car to
A is not entitled to claim a casualty lossbecause all of his income partake on
maximize his visits even to
thenature of compensation income.Taxpayers earning compensation of
far flung areas. One fine Gros
incomearising from personal services under anemployee-employer Income Gro
1 day a group of militants s
relationship are notallowed to claim deduction except thatallowed under Sec Taxatio ss 2010
8 seized his car. He was Inco
34(M) referring only tothe P2,400 health and/or hospitalizationinsurance n Esta
notified the following day me
premium; perforce the claimof casualty loss has no legal basis (Sec34, NIRC). te
by the police that the
UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS and
marines and the militants
Net
had a bloody encounter and
Esta
his car was completely
te
destroyed after a grenade
hit it.A wants to file a claim
for casualty loss. Explain
the legal basis of your tax
advice. (3%)
In 2009, Caruso, a resident
Filipino citizen, received
dividend income from a
Ded
U.S.-based corporation Caruso has the option either to claim
ucti
which owns a chain of the amount of income tax withheld in Gros
Income ons
1 Filipino restaurants in the U.S. as deduction from his gross income s
Taxatio fro 2010
9 West Coast, U.S.A. The in the Philippines, or to claim it as a tax Inco
n m
dividend remitted to Caruso credit (Sec 34 (C )(1)(b), NIRC).UP LAW COMPLEX & PHILIPPINE ASSOCIATION me
Esta
is subject to U.S. OF LAW SCHOOLS
te
withholding tax with
respect to a non-resident
alien like Caruso. What will
 be your advice to Caruso in
order to lessen the impact
of possible double taxation
on the same income? (3%)

In 2009, Caruso, a resident

Filipino citizen, received
Taxa
dividend income from a
tion
U.S.-based corporation
of
which owns a chain of
resid
Filipino restaurants in the
ent
West Coast, U.S.A. The
citiz Ded
dividend remitted to Caruso
ens, ucti
is subject to U.S. No. The income abroad of a nonresident citizen is exempt from the Philippine
Income non- ons
2 withholding tax with income tax; hence there is no international double taxation on said income.
Taxatio resid fro 2010
0 respect to a non-resident UP LAW COMPLEX & PHILIPPINE ASSOCIATION
n ent m
alien like Caruso. Would OF LAW SCHOOLS
citiz Esta
your answer in A. be the
ens, te
same if Caruso became a
and
U.S. immigrant in 2008 and
resid
had become a non-resident
ent
Filipino citizen? Explain the
alien
difference in treatment for
s
Philippine income tax
purposes. (3%)
 ABC, a domestic
corporation, entered into a
software license agreement
with XYZ, a non-resident
foreign corporation based
in the U.S. Under the
agreement which the The amount payable under the agreement is in the nature of royalty. The term
parties forged in the U.S., royalty is broad enough to include compensation for the use of an intellectual Ded
XYZ granted ABC the right property and supply of technical know-how as a means of enabling application ucti
Gros
to use a computer system or enjoyment of any such property or right (Sec 42(4), NIRC).The royalties paid Income ons
2 s
program and to avail of to the non-resident U.S. corporation, equivalent to 5% of therevenues derived Taxatio fro 2010
1 technical know-how Inco
by ABC for the use ofthe program in the Philippines, issubject to a 30% final n m
me
relative to such program. In withholding tax,unless a lower tax rate is prescribedunder an existing tax Esta
consideration for such treaty. (Sec28(B)(1), NIRC). UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF te
rights, ABC agreed to pay LAW SCHOOLS
5% of the revenues it
receives from customers
who will use and apply the
program in the Philippines.
Discuss the tax implication
of the transaction. (5%)
 Don Sebastian, single but
head of the family, Filipino,
and resident of Pasig City,
died intestate on November
15, 2009. He left the
following properties and
interests: House and lot
(family home) in Pasig P
800,000 Vacation house
and lot in Florida, USA
1,500,000Agricultural
landin Naic, Cavite which he
inherited from his father
2,000,000 Car which isbeing Com
Ded
used by his brother in All the properties and interestsenumerated in the problem should beincluded posit
ucti
Cavite 500,000 Proceeds of in the gross estate if thedecedent. The composition of a grossestate of a ion
ons
2 life insurance where he decedent who is a citizen ofthe Philippines includes all properties,tangible or Estate of
fro 2010
2 named his estate as intangible, wherever situatedand to the extent of the interest that hehas Tax Gros
m
irrevocable beneficiary thereon at the time of his death (Sec85, NIRC). UP LAW COMPLEX & s
Esta
1,000,000Householdfurnitu PHILIPPINE ASSOCIATIONOF LAW SCHOOLS Estat
te
re andappliances e
1,000,000Claims against
acousin who hasassets
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stock in ABC Corp, a
domestic enterpriseThe
expenses and charges in the
estate are as
follows:Funeral Expenses P
250,000Legal fees for the
settlement of the estate
500,000Medical expenses
of last illness 600,000Claims
against the estate
300,000The compulsory
heirs of Don Sebastian
approach you and seek
your assistance in the
settlement of his estate for
which they have agreed to
the above-stated
professional fees. a. What
are the properties and
interests that should be
included in the
computation of the gross
estate of the decedent?
Explain. (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
Com
landin Naic, Cavitewhich The net taxable extent of the decedent is P3,700,000.00. From the gross Dete
mon
heinherited fromhis estate of P7 million the following deductions are allowed: (1) funeral expenses rmin
Limi
father2,000,000Car which of P200,000 which is the maximum allowed by law; (2) legal fees amounting to ation
tati
isbeing used byhis brother P500,000; (3) medical expenses not to exceed P500,000; (4) Claims against the of
ons
inCavite 500,000Proceeds estate of P300,000; (5) family homeequivalent to its fair market value (not to gros
on
2 of lifeinsurance wherehe exceed P1 million) of P800,000; and (6) standard deduction of P1 million, or a Estate s
the 2010
3 named hisestate total allowable deduction of P3,300,000.00 (Sec 86, NIRC).The claim against Tax estat
taxi
asirrevocablebeneficiary the cousin amounting to P100, 000, although included in the gross estate, e
ng
1,000,000Householdfurnitu cannot be claimed as a deduction because the debtor is not yet declared and
pow
re andappliances insolvent. Likewise, the inherited property cannot give rise to a vanishing net
ers
1,000,000Claims against deduction for want of sufficient factual basis (Sec 86, NIRC).UP LAW COMPLEX estat
of
acousin who hasassets & PHILIPPINE ASSOCIATION OF LAW SCHOOLS e
LGU
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees.b.
What is the net taxable
estate of the decedent?
Explain. (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
landin Naic, Cavitewhich The filing of the return and payment ofthe tax is within 6 months from date
heinherited fromhis ofdeath following the pay-as-you-fileconcept. The period to file return
Valu
father2,000,000Car which isextendible for a maximum of 30 daysunder meritorious cases as
atio
isbeing used byhis brother maybedetermined by the Commissioner. Thepayment of the estate tax may
Estat n of
inCavite 500,000Proceeds also beextended when the Commissioner findsthat the payment of the tax on
e gifts
2 of lifeinsurance wherehe the duedate would impose undue hardship onthe estate or any of the heirs. Estate
Tax mad 2010
4 named hisestate The periodof extension to pay shall not exceed 5years if the estate is settled Tax
Retu e in
asirrevocablebeneficiary through thecourts, or shall not exceed 2 years ifsettled extrajudicially.
rn pro
1,000,000Householdfurnitu TheCommissioner may require the executor,or administrator, or the
pert
re andappliances beneficiary tofurnish a bond in an amount not morethan double the amount
y
1,000,000Claims against of estate taxdue (Sec 91, NIRC). UP LAW COMPLEX & PHILIPPINE
acousin who hasassets ASSOCIATIONOF LAW SCHOOLS
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees. c.
When is the due date for
filing and payment of the
applicable tax return and
tax? Are these dates
extendible? If so, under
what conditions or
requirements? (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
If the renunciation is a generalrenunciation such that the share of theheir who Effe
landin Naic, Cavitewhich
waives his right to theinheritance goes to the other co-heirs inaccordance with ct of
heinherited fromhis
their respective interestin the inheritance, the law on accretionapplies and the ren
father2,000,000Car which Com
property waived isconsidered to pass through the other coheirs by unci
isbeing used byhis brother posit
inheritance; hence, it has no taximplication. Undoubtedly, when atio
inCavite 500,000Proceeds ion
thecompulsory heir renounced his share inthe inheritance, he did not donate n/w
2 of lifeinsurance wherehe Estate of
theproperty which did not become his. Suchbeing the case, the renunciation is aive 2010
5 named hisestate notsubject to the donor’s tax. If it is not ageneral renunciation in favor of
Tax Gros
r of
asirrevocablebeneficiary s
theother co-heirs, the heir renouncing hisright is considered to have made inhe
1,000,000Householdfurnitu Estat
adonation and the renunciation is subjectto donor’s tax. In both cases, rita
re andappliances e
however,the renunciation has no tax implicationto the other co-heirs (BIR nce
1,000,000Claims against
Ruling No. DA(DT-039) 396-09, dated July 23, 2009).UP LAW COMPLEX & by
acousin who hasassets
PHILIPPINE ASSOCIATIONOF LAW SCHOOLS heir
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees.d. If
X, one of the compulsory
heirs, renounces his share
in the inheritance in favor
of the other co-heirs, is
there any tax implication of
X’s renunciation? What
about the other coheirs?
(2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
landin Naic, Cavitewhich
heinherited fromhis Wit
father2,000,000Car which Com h
isbeing used byhis brother All the properties and interestsenumerated in the problem should beincluded posit resp
inCavite 500,000Proceeds in the gross estate if thedecedent. The composition of a grossestate of a ion ect
2 of lifeinsurance wherehe decedent who is a citizen ofthe Philippines includes all properties,tangible or Estate of to
2010
6 named hisestate intangible, wherever situatedand to the extent of the interest that hehas Tax Gros resi
asirrevocablebeneficiary thereon at the time of his death (Sec85, NIRC). UP LAW COMPLEX & s den
1,000,000Householdfurnitu PHILIPPINE ASSOCIATIONOF LAW SCHOOLS Estat t
re andappliances e citiz
1,000,000Claims against en
acousin who hasassets
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees. a.
What are the properties
and interests that should be
included in the
computation of the gross
estate of the decedent?
Explain. (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
landin Naic, Cavitewhich The net taxable extent of the decedent isP3,700,000.00. From the gross estate
heinherited fromhis ofP7 million the following deductions areallowed: (1) funeral expenses of
father2,000,000Car which P200,000 which is the maximum allowedby law; (2) legal fees amounting
Ded
isbeing used byhis brother toP500,000; (3) medical expenses not toexceed P500,000; (4) Claims against Ded
ucti
inCavite 500,000Proceeds theestate of P300,000; (5) family homeequivalent to its fair market value uctio
ons
2 of lifeinsurance wherehe (notto exceed P1 million) of P800,000; and(6) standard deduction of P1 Estate ns
fro 2010
7 named hisestate million, or atotal allowable deduction ofP3,300,000.00 (Sec 86, NIRC).The Tax from
m
asirrevocablebeneficiary claim against the cousin amountingto P100, 000, although included in estat
esta
1,000,000Householdfurnitu thegross estate, cannot be claimed as adeduction because the debtor is not e
te
re andappliances yetdeclared insolvent. Likewise, the inherited property cannot give rise to
1,000,000Claims against avanishing deduction for want ofsufficient factual basis (Sec 86, NIRC).UP LAW
acousin who hasassets COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees.b.
What is the net taxable
estate of the decedent?
Explain. (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural Proc
landin Naic, Cavitewhich The filing of the return and payment ofthe tax is within 6 months from date edu
heinherited fromhis ofdeath following the pay-as-you-fileconcept. The period to file return re
father2,000,000Car which isextendible for a maximum of 30 daysunder meritorious cases as for
isbeing used byhis brother maybedetermined by the Commissioner. Thepayment of the estate tax may Esta
Estat
inCavite 500,000Proceeds also beextended when the Commissioner findsthat the payment of the tax on te
e
2 of lifeinsurance wherehe the duedate would impose undue hardship onthe estate or any of the heirs. Estate Tax
Tax 2010
8 named hisestate The periodof extension to pay shall not exceed 5years if the estate is settled Tax
Retu
Settl
asirrevocablebeneficiary through thecourts, or shall not exceed 2 years ifsettled extrajudicially. eme
rn
1,000,000Householdfurnitu TheCommissioner may require the executor,or administrator, or the nt :
re andappliances beneficiary tofurnish a bond in an amount not morethan double the amount Filin
1,000,000Claims against of estate taxdue (Sec 91, NIRC). UP LAW COMPLEX & PHILIPPINE g of
acousin who hasassets ASSOCIATIONOF LAW SCHOOLS Ret
ofP10,000 andliabilities urn
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees. c.
When is the due date for
filing and payment of the
applicable tax return and
tax? Are these dates
extendible? If so, under
what conditions or
requirements? (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
If the renunciation is a generalrenunciation such that the share of theheir who Effe
landin Naic, Cavitewhich
waives his right to theinheritance goes to the other co-heirs inaccordance with ct of
heinherited fromhis
their respective interestin the inheritance, the law on accretionapplies and the ren
father2,000,000Car which Com
property waived isconsidered to pass through the other coheirs by unci
isbeing used byhis brother posit
inheritance; hence, it has no taximplication. Undoubtedly, when atio
inCavite 500,000Proceeds ion
thecompulsory heir renounced his share inthe inheritance, he did not donate n/w
2 of lifeinsurance wherehe Estate of
theproperty which did not become his. Suchbeing the case, the renunciation is aive 2010
9 named hisestate notsubject to the donor’s tax. If it is not ageneral renunciation in favor of
Tax Gros
r of
asirrevocablebeneficiary s
theother co-heirs, the heir renouncing hisright is considered to have made inhe
1,000,000Householdfurnitu Estat
adonation and the renunciation is subjectto donor’s tax. In both cases, rita
re andappliances e
however,the renunciation has no tax implicationto the other co-heirs (BIR nce
1,000,000Claims against
Ruling No. DA(DT-039) 396-09, dated July 23, 2009).UP LAW COMPLEX & by
acousin who hasassets
PHILIPPINE ASSOCIATIONOF LAW SCHOOLS heir
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees.d. If
X, one of the compulsory
heirs, renounces his share
in the inheritance in favor
of the other co-heirs, is
there any tax implication of
X’s renunciation? What
about the other coheirs?
(2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
landin Naic, Cavitewhich
heinherited fromhis Wit
father2,000,000Car which Com h
isbeing used byhis brother All the properties and interestsenumerated in the problem should beincluded posit resp
inCavite 500,000Proceeds in the gross estate if thedecedent. The composition of a grossestate of a ion ect
3 of lifeinsurance wherehe decedent who is a citizen ofthe Philippines includes all properties,tangible or Estate of to
2010
0 named hisestate intangible, wherever situatedand to the extent of the interest that hehas Tax Gros resi
asirrevocablebeneficiary thereon at the time of his death (Sec85, NIRC). UP LAW COMPLEX & s den
1,000,000Householdfurnitu PHILIPPINE ASSOCIATIONOF LAW SCHOOLS Estat t
re andappliances e citiz
1,000,000Claims against en
acousin who hasassets
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees. a.
What are the properties
and interests that should be
included in the
computation of the gross
estate of the decedent?
Explain. (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
landin Naic, Cavitewhich The net taxable extent of the decedent isP3,700,000.00. From the gross estate Dete
heinherited fromhis ofP7 million the following deductions areallowed: (1) funeral expenses of rmin
father2,000,000Car which P200,000 which is the maximum allowedby law; (2) legal fees amounting ation
Ded
isbeing used byhis brother toP500,000; (3) medical expenses not toexceed P500,000; (4) Claims against of
ucti
inCavite 500,000Proceeds theestate of P300,000; (5) family homeequivalent to its fair market value gros
ons
3 of lifeinsurance wherehe (notto exceed P1 million) of P800,000; and(6) standard deduction of P1 Estate s
fro 2010
1 named hisestate million, or atotal allowable deduction ofP3,300,000.00 (Sec 86, NIRC).The Tax estat
m
asirrevocablebeneficiary claim against the cousin amountingto P100, 000, although included in e
Esta
1,000,000Householdfurnitu thegross estate, cannot be claimed as adeduction because the debtor is not and
te
re andappliances yetdeclared insolvent. Likewise, the inherited property cannot give rise to net
1,000,000Claims against avanishing deduction for want ofsufficient factual basis (Sec 86, NIRC).UP LAW estat
acousin who hasassets COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS e
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees.b.
What is the net taxable
estate of the decedent?
Explain. (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural Proc
landin Naic, Cavitewhich The filing of the return and payment ofthe tax is within 6 months from date edu
heinherited fromhis ofdeath following the pay-as-you-fileconcept. The period to file return re
father2,000,000Car which isextendible for a maximum of 30 daysunder meritorious cases as for
isbeing used byhis brother maybedetermined by the Commissioner. Thepayment of the estate tax may Esta
Estat
inCavite 500,000Proceeds also beextended when the Commissioner findsthat the payment of the tax on te
e
3 of lifeinsurance wherehe the duedate would impose undue hardship onthe estate or any of the heirs. Estate Tax
Tax 2010
2 named hisestate The periodof extension to pay shall not exceed 5years if the estate is settled Tax
Retu
Settl
asirrevocablebeneficiary through thecourts, or shall not exceed 2 years ifsettled extrajudicially. eme
rn
1,000,000Householdfurnitu TheCommissioner may require the executor,or administrator, or the nt :
re andappliances beneficiary tofurnish a bond in an amount not morethan double the amount Filin
1,000,000Claims against of estate taxdue (Sec 91, NIRC). UP LAW COMPLEX & PHILIPPINE g of
acousin who hasassets ASSOCIATIONOF LAW SCHOOLS Ret
ofP10,000 andliabilities urn
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees. c.
When is the due date for
filing and payment of the
applicable tax return and
tax? Are these dates
extendible? If so, under
what conditions or
requirements? (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
If the renunciation is a generalrenunciation such that the share of theheir who Effe
landin Naic, Cavitewhich
waives his right to theinheritance goes to the other co-heirs inaccordance with ct of
heinherited fromhis
their respective interestin the inheritance, the law on accretionapplies and the ren
father2,000,000Car which Com
property waived isconsidered to pass through the other coheirs by unci
isbeing used byhis brother posit
inheritance; hence, it has no taximplication. Undoubtedly, when atio
inCavite 500,000Proceeds ion
thecompulsory heir renounced his share inthe inheritance, he did not donate n/w
3 of lifeinsurance wherehe Estate of
theproperty which did not become his. Suchbeing the case, the renunciation is aive 2010
3 named hisestate notsubject to the donor’s tax. If it is not ageneral renunciation in favor of
Tax Gros
r of
asirrevocablebeneficiary s
theother co-heirs, the heir renouncing hisright is considered to have made inhe
1,000,000Householdfurnitu Estat
adonation and the renunciation is subjectto donor’s tax. In both cases, rita
re andappliances e
however,the renunciation has no tax implicationto the other co-heirs (BIR nce
1,000,000Claims against
Ruling No. DA(DT-039) 396-09, dated July 23, 2009).UP LAW COMPLEX & by
acousin who hasassets
PHILIPPINE ASSOCIATIONOF LAW SCHOOLS heir
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees.d. If
X, one of the compulsory
heirs, renounces his share
in the inheritance in favor
of the other co-heirs, is
there any tax implication of
X’s renunciation? What
about the other coheirs?
(2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
landin Naic, Cavitewhich
heinherited fromhis Wit
father2,000,000Car which Com h
isbeing used byhis brother All the properties and interestsenumerated in the problem should beincluded posit resp
inCavite 500,000Proceeds in the gross estate if thedecedent. The composition of a grossestate of a ion ect
3 of lifeinsurance wherehe decedent who is a citizen ofthe Philippines includes all properties,tangible or Estate of to
2010
4 named hisestate intangible, wherever situatedand to the extent of the interest that hehas Tax Gros resi
asirrevocablebeneficiary thereon at the time of his death (Sec85, NIRC). UP LAW COMPLEX & s den
1,000,000Householdfurnitu PHILIPPINE ASSOCIATIONOF LAW SCHOOLS Estat t
re andappliances e citiz
1,000,000Claims against en
acousin who hasassets
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees. a.
What are the properties
and interests that should be
included in the
computation of the gross
estate of the decedent?
Explain. (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
landin Naic, Cavitewhich The net taxable extent of the decedent isP3,700,000.00. From the gross estate Dete
heinherited fromhis ofP7 million the following deductions areallowed: (1) funeral expenses of rmin
father2,000,000Car which P200,000 which is the maximum allowedby law; (2) legal fees amounting ation
Ded
isbeing used byhis brother toP500,000; (3) medical expenses not toexceed P500,000; (4) Claims against of
ucti
inCavite 500,000Proceeds theestate of P300,000; (5) family homeequivalent to its fair market value gros
ons
3 of lifeinsurance wherehe (notto exceed P1 million) of P800,000; and(6) standard deduction of P1 Estate s
fro 2010
5 named hisestate million, or atotal allowable deduction ofP3,300,000.00 (Sec 86, NIRC).The Tax estat
m
asirrevocablebeneficiary claim against the cousin amountingto P100, 000, although included in e
Esta
1,000,000Householdfurnitu thegross estate, cannot be claimed as adeduction because the debtor is not and
te
re andappliances yetdeclared insolvent. Likewise, the inherited property cannot give rise to net
1,000,000Claims against avanishing deduction for want ofsufficient factual basis (Sec 86, NIRC).UP LAW estat
acousin who hasassets COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS e
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees.b.
What is the net taxable
estate of the decedent?
Explain. (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural Proc
landin Naic, Cavitewhich The filing of the return and payment ofthe tax is within 6 months from date edu
heinherited fromhis ofdeath following the pay-as-you-fileconcept. The period to file return re
father2,000,000Car which isextendible for a maximum of 30 daysunder meritorious cases as for
isbeing used byhis brother maybedetermined by the Commissioner. Thepayment of the estate tax may Esta
Estat
inCavite 500,000Proceeds also beextended when the Commissioner findsthat the payment of the tax on te
e
3 of lifeinsurance wherehe the duedate would impose undue hardship onthe estate or any of the heirs. Estate Tax
Tax 2010
6 named hisestate The periodof extension to pay shall not exceed 5years if the estate is settled Tax
Retu
Settl
asirrevocablebeneficiary through thecourts, or shall not exceed 2 years ifsettled extrajudicially. eme
rn
1,000,000Householdfurnitu TheCommissioner may require the executor,or administrator, or the nt :
re andappliances beneficiary tofurnish a bond in an amount not morethan double the amount Filin
1,000,000Claims against of estate taxdue (Sec 91, NIRC). UP LAW COMPLEX & PHILIPPINE g of
acousin who hasassets ASSOCIATIONOF LAW SCHOOLS Ret
ofP10,000 andliabilities urn
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees. c.
When is the due date for
filing and payment of the
applicable tax return and
tax? Are these dates
extendible? If so, under
what conditions or
requirements? (2.5%)
 Don Sebastian, single but
head of thefamily, Filipino,
and resident of Pasig
City,died intestate on
November 15, 2009. Heleft
the following properties
and interests:House and
lot(family home) inPasig P
800,000Vacation houseand
lot inFlorida, USA
1,500,000Agricultural
If the renunciation is a generalrenunciation such that the share of theheir who Effe
landin Naic, Cavitewhich
waives his right to theinheritance goes to the other co-heirs inaccordance with ct of
heinherited fromhis
their respective interestin the inheritance, the law on accretionapplies and the ren
father2,000,000Car which Com
property waived isconsidered to pass through the other coheirs by unci
isbeing used byhis brother posit
inheritance; hence, it has no taximplication. Undoubtedly, when atio
inCavite 500,000Proceeds ion
thecompulsory heir renounced his share inthe inheritance, he did not donate n/w
3 of lifeinsurance wherehe Estate of
theproperty which did not become his. Suchbeing the case, the renunciation is aive 2010
7 named hisestate notsubject to the donor’s tax. If it is not ageneral renunciation in favor of
Tax Gros
r of
asirrevocablebeneficiary s
theother co-heirs, the heir renouncing hisright is considered to have made inhe
1,000,000Householdfurnitu Estat
adonation and the renunciation is subjectto donor’s tax. In both cases, rita
re andappliances e
however,the renunciation has no tax implicationto the other co-heirs (BIR nce
1,000,000Claims against
Ruling No. DA(DT-039) 396-09, dated July 23, 2009).UP LAW COMPLEX & by
acousin who hasassets
PHILIPPINE ASSOCIATIONOF LAW SCHOOLS heir
ofP10,000 andliabilities
ofP100,000 100,000Shares
of stockin ABC Corp,
adomestic
100,000enterpriseThe
expenses and chargeson
the estate are as
follows:FuneralExpenses P
250,000Legal fees for
thesettlement of theestate
500,000Medicalexpenses of
 lastillness 600,000Claims
againstthe estate
300,000The compulsory
heirs of Don
Sebastianapproach you and
seek your assistance inthe
settlement of his estate for
which theyhave agreed to
the above-
statedprofessional fees.d. If
X, one of the compulsory
heirs, renounces his share
in the inheritance in favor
of the other co-heirs, is
there any tax implication of
X’s renunciation? What
about the other coheirs?
(2.5%)

In civil cases involving the Taxp

TAX Coll
3 collection of internal TRUE. UP LAW COMPLEX & PHILIPPINE ASSOCIATION ayer'
REMEDI ecti 2010
8 revenue taxes, prescription OF LAW SCHOOLS s
ES on
is construed strictly against rem
 the government and edie
liberally in favor of the s
taxpayer. True or False (1%)
In criminal cases involving
tax offenses punishable Taxp
under the National Internal ayer'
TAX Coll
3 Revenue Code (NIRC), FALSE. UP LAW COMPLEX & PHILIPPINE ASSOCIATION s
REMEDI ecti 2010
9 prescription is construed OF LAW SCHOOLS rem
ES on
strictly against the edie
government. True or False s
(1%)
In criminal cases where the
Court of Tax Appeals (CTA)
Judic Judi
has exclusive original
Judicial ial cial
4 jurisdiction, the right to file
FALSE. UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS Remedi proc proc 2010
0 a separate civil action for
es edur edu
the recovery of taxes may
es res
be reserved. True or False
(1%)
Proceedings before the Juris Juris
CTA in the exercise of its dicti dicti
Judicial
4 exclusive original TRUE. UP LAW COMPLEX & PHILIPPINE ASSOCIATION on on
Remedi 2010
1 jurisdiction are in the OF LAW SCHOOLS of of
es
nature of trial de novo. True the the
or False (1%) CTA CTA
Judgments, resolutions or
orders of the Regional Trial Juris Juris
Court in the exercise of dicti dicti
Judicial
4 its original jurisdiction FALSE. UP LAW COMPLEX & PHILIPPINE ASSOCIATION on on
Remedi 2010
2 involving criminal offenses OF LAW SCHOOLS of of
es
arising from violations of the the
the NIRC are appealable to CTA CTA
the CTA, which shall hear
 the cases en banc. True or
False (1%)

The waiver of the statute of limitation

executed by a taxpayer is not a waiver of
the right to invoke the defense of
prescription. The waiver of the statute of
limitation is merely an agreement in
What is the effect of the writing between the taxpayer and the Judic Judi
execution by a taxpayer of a BIR that the period to assess and collect Judicial ial cial
4
"waiver of the statute of taxes due is extended to a date certain. Remedi proc proc 2010
3 limitations" on his defense If prescription has already set in at the es edur edu
of prescription? (2%) time of execution of the waiver or if the es res
said waiver is invalid, the taxpayer can
still raise prescription as defense (Phil.
Journalists Inc., v. CIR, G.R. No.
162852, Dec. 16, 2004) UP LAW COMPLEX & PHILIPPINE ASSOCIATION
OF LAW SCHOOLS

On March 10, 2010,

Continental, Inc. received a
preliminary assessment
notice (PAN) dated March
No. The issuance of preliminaryassessment notice (PAN) does not giverise to Taxp
1, 2010 issued by the
the right of the taxpayer toprotest. What can be protested by thetaxpayer is ayer'
Commissioner of Internal TAX Asse
4 the final assessment notice(FAN) or that assessment issuedfollowing the PAN. s
Revenue (CIR) for deficiency REMEDI ssm 2010
4 Since the FAN wastimely protested (within 30 days fromreceipt thereof, the rem
income tax for its taxable ES ent
assessment did notbecome final and executory (Sec 228,NIRC; RR No. 12-99). edie
year 2008. It failed to
UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS s
protest the PAN. The CIR
thereupon issued a final
assessment notice (FAN)
with letter of demand on
April 30, 2010. The FAN was
received by the corporation
on May 10, 2010, following
which or on May 25, 2010,
it filed its protest against
it.The CIR denied the
protest on the ground that
the assessment had already
become final and
executory, the corporation
having failed to protest the
PAN.Is the CIR correct?
Explain. (5%)
 No, for either of two reasons (1) ininstances in which the Commissioner
ofInternal Revenue is vested withauthority to compromise, such
authorityshould be exercised in accordance withthe Commissioner’s
discretion, andcourts have no power, as a general rule,to compel him to
exercise suchdiscretion one way or another (KoppelPhils., Inc. v. CIR, 87 Phil,
Does the Court of Appeals
351 (1950);(2) If the Commissioner abuses hisdiscretion by not following
have the power to review Judic Judi
theparameters set by law, the CTA, not theCourt of Appeals, may correct
compromise agreements Judicial ial cial
4 suchabuse if the matter is appealed to it. Incase of arbitrary or capricious
forged by the Remedi proc proc 2010
5 Commissioner of Internal exerciseby the Commissioner of the power tocompromise, the compromise
es edur edu
can beattacked and reversed through thejudicial process. It must be
Revenue and a taxpayer? es res
notedhowever, that a compromise isconsidered as other matters arisingunder
Explain. (5%)
the NIRC which vests the CTAwith jurisdiction, and since the decisionof the
CTA is appealable to the SupremeCourt, the Court of Appeals is devoid ofany
power of review a compromisesettlement forged by the Commissioner(PNOC
v. Savellano, G.R. No. 109976,April 26, 2005; RA 9282 on jurisdictionof CTA).
UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
 Based on the Affidavit of
the Commissioner of
Internal Revenue (CIR), an
Information for failure to
file income tax return under
Section 255 of the National
Internal Revenue Code
(NIRC) was filed by the No. In the case of failure to file a return,a proceeding in court for the
Department of Justice (DOJ) collectionof the tax may be filed without anassessment (Sec 222 (a), NIRC).
with the Manila Regional The taxcan be collected by filing a criminalaction with the RTC because a
Judic Judi
Trial Court (RTC) against XX, criminalaction is a mode of collecting the taxliability. (Sec. 205, NIRC). Besides,
Judicial ial cial
4 a Manila resident. XX theCommissioner is empowered to prepare areturn on the basis if his own
Remedi proc proc 2010
6 moved to quash the knowledge,and upon such information as he canobtain from testimony or
es edur edu
Information on the ground otherwise,which shall be prima facie correct andsufficient for legal purposes
es res
that the RTC has no (Sec 6 (B),NIRC; the issuance of a formal deficiencytax assessment, therefore,
jurisdiction in view of the is notrequired. UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW
absence of a formal SCHOOLS
deficiency tax assessment
issued by the CIR. Is a prior
assessment necessary
before an Information for
violation of Section 255 of
the NIRC could be filed in
court? Explain. (4%)
 What are the conditions The CTA may suspend the collection ofinternal revenue taxes if the
Taxp
that must be complied with followingconditions are met:1. the case is pending appealwith the CTA;2. in
ayer'
before the Court of Tax the opinion of the Court thecollection will jeopardize theinterest of the TAX Coll
4 s
Appeals may suspend the Governmentand/or the taxpayer; and3. the taxpayer is willing todeposit in REMEDI ecti 2010
7 collection of national rem
Court the amountbeing collected or to file asurety bond for not more ES on
edie
internal revenue taxes? thandouble the amount of the tax(Sec 11, RA 1125, as amendedby RA 9282).
s
(3%) UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS
 Decisions of the Collector of Customs inprotest and seizure cases are
What is the rule on appeal appealableto the Commissioner of Customs within15 days from receipt of
from decisions of the notice of thewritten decision.As a rule, decisions of the Collector ofCustoms
Collector of Customs in are not appealable to the Court of Tax Appeals. If the Collector ofCustoms, Tariff Gov
Rem
4 protest and seizure cases? however, does not decide aprotest for a long period of time, theinaction may and ern
edie 2010
8 When is the decision of the be considered as anadverse decision by the Collector ofCustoms and the Custom
s
men
Collector of Customs aggrieved taxpayer mayappeal to the CTA even without theCollector’s and s t
appealable to the Court of Commissioner’s actualdecision (Commissioner of Customs v.Planters Products,
Tax Appeals? Explain. (5%) Inc. G.R. No. 82018,March 16, 1989).UP LAW COMPLEX & PHILIPPINE
ASSOCIATIONOF LAW SCHOOLS
 Amaretto, Inc., imported
100 cases of Marula wine
from South Africa. The
shipment was assessed
duties and value-added
taxes of P300,000 which
Amaretto, Inc. immediately
paid. The Bureau of
Customs did not, however,
issue the release papers of
the shipment yet since the
Food and Drug
Administration (FDA) Begi
needed to test the nnin
Requ
suitability of the wine for g
irem
human consumption. Is the (D) No, because the Bureau of Customs has not yet issued the legal permit for Tariff and
ents
Bureau of Customs at fault withdrawal pending the FDA's findings. (UP LAW COMPLEX & PHILIPPINE and endi
1 of 2011
for refusing to release the ASSOCIATION Custom ng
impo
shipment just as yet? OF LAW SCHOOLS) s of
rtati
(A) Yes, because the imp
on
importation was already orta
terminated as a result of tion
the payment of the taxes
due.
(B) Yes, the Bureau of
Customs is estopped from
holding the release of the
shipment after receiving
the payment.
(C) No, if the amount paid
as duties and value-added
taxes due on the
importation was
insufficient.
 (D) No, because the Bureau
of Customs has not yet
issued the legal permit for
withdrawal pending the
FDA's findings.

A violation of the tariff and

customs laws is the failure
to (A) pay the customs
duties and taxes and to Requ Obli
comply with the rules on irem gati
Tariff
customs procedures.(B) pay (B) pay the customs duties and taxes or to comply with the rules on customs ents ons
and
2 the customs duties and procedures. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW of of 2011
Custom
taxes or to comply with the SCHOOLS) impo imp
s
rules on customs rtati orte
procedures.(C) pay the on r
customs duties and taxes.
(D) comply with the rules
on customs procedures.
 Is an article previously
exported from the
Philippines subject to the
payment of customs
duties?
Gen
(A) Yes, because all articles
eral Imp
that are imported from any
rule: orta
foreign country are subject
all tion
to duty.
impo by
(B) No, because there is no Tariff
(D) No, if it is covered by a certificate of identification and has not been rted the
basis for imposing duties on and
3 improved in value. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW articl gov 2011
articles previously exported Custom
SCHOOLS) es ern
from the Philippines. s
are men
(C) Yes, because
subj t
exemptions are strictly
ect taxa
construed against the
to ble
importer who is the
duty
taxpayer.
(D) No, if it is covered by a
certificate of identification
and has not been improved
in value.
Under the Tariff and
Customs Code, abandoned
imported articles becomes
the property of the Class
taxa
(A) government whatever Tariff ificat
ble
be the circumstances. (A) government whatever be the circumstances. (UP LAW COMPLEX & and ion
4 imp 2011
(B) insurance company that PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Custom of
orta
covered the shipment. s good
tion
(C) shipping company in s
case the freight was not
paid.
(D) bank if the shipment is
 covered by a letter of
credit.

Discriminatory duties may

NOT be imposed upon
articles
(A) wholly manufactured in
the discriminating country
but carried by vessels of
another country.
Class
(B) not manufactured in the
Tariff ificat Spe
discriminating country but (D) not manufactured in the discriminating country and carried by vessels of
and ion cial
5 carried by vessels of such another country. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION 2011
Custom of duti
country. OF LAW SCHOOLS)
s duti es
(C) partly manufactured in
es
the discriminating country
but carried by vessels of
another country.
(D) not manufactured in the
discriminating country and
carried by vessels of
another country.
A municipality may levy an Pow
annual ad valorem tax on Impo er
real property such as land, Real sitio to
building, machinery, and Propert n of levy
(A) the real property is within the Metropolitan Manila Area. (UP LAW
6 other improvement only y Real real 2011
COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
if(A) the real property is Taxatio Prop pro
within the Metropolitan n erty pert
Manila Area.(B) the real Tax y
property is located in the tax
 municipality.(C) the DILG
authorizes it to do so. (D)
the power is delegated to it
by the province.

After the province has

constructed a barangay
road, the Sangguniang
Panglalawigan may impose
a special levy upon the
lands specifically benefitted
by the road up to an
amount not to exceed Pow
(A) 60% of the actual cost of Impo er
the road without giving any Local sitio to
portion to the barangay. Govern n of levy
(A) 60% of the actual cost of the road without giving any portion to the
7 (B) 100% of the actual ment Real real 2011
barangay. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
project cost without giving Taxatio Prop pro
any portion to the n erty pert
barangay. Tax y
(C) 100% of the actual tax
project cost, keeping 60%
for the province and giving
40% to the barangay.
(D) 60% of the actual cost,
dividing the same between
the province and the
barangay.
 What is the tax base for the
imposition by the province Spec
of professional taxes? ific
(A) That which Congress taxin
determined. g
Local
(B) The pertinent provision pow Prof
(C) The reasonable classification made by the provincial sanggunian. (UP LAW Govern
of the local Government er of essi
8 COMPLEX & PHILIPPINE ASSOCIATION ment 2011
Code. Local onal
OF LAW SCHOOLS) Taxatio
(C) The reasonable Gove tax
n
classification made by the rnm
provincial sanggunian. ent
(D) That which the Dept. of Unit
Interior and Local s
Government determined.
Prior to the enactment of
the Local Government
Code, consumer's
cooperatives registered
under the Cooperative
Development Act enjoyed
Natu
exemption from all taxes with
re
imposed by a local dra
Local and
government. With the Local wal
(D) Yes, their exemption is specifically mentioned among those not withdrawn Govern Sour
Government Code‟s fro
9 by the Local Government Code. (UP LAW COMPLEX & PHILIPPINE ment ce of 2011
withdrawal of exemptions, m
ASSOCIATION OF LAW SCHOOLS) Taxatio Taxi
could these cooperatives exe
n ng
continue to enjoy such mpt
Pow
exemption? ions
er
(A) Yes, because the Local
Government Code, a
general law, could not
amend a special law such as
the Cooperative
Development Act.
 (B) No, Congress has not by
the majority vote of all its
members granted
exemption to consumers'
cooperatives. (C) No,
the exemption has been
withdrawn to level the
playing field for all
taxpayers and preserve the
LGUs' financial position.
(D) Yes, their exemption is
specifically mentioned
among those not
withdrawn by the Local
Government Code.
No
appr
Money collected from opri
taxation shall not be paid to atio
any religious dignitary n or
EXCEPT when use
(A) the religious dignitary is General Doct of
assigned to the Philippine (A) the religious dignitary is assigned to the Philippine Army. (UP LAW Principl rines publ
1
Army. COMPLEX & PHILIPPINE ASSOCIATION es of in ic 2011
0
(B) it is paid by a local OF LAW SCHOOLS) Taxatio Taxa mon
government unit. n tion ey
(C) the payment is passed in for
audit by the COA. relig
(D) it is part of a ious
lawmaker‟s pork barrel. pur
pos
es
 Real property owned by the
national government is
exempt from real property
taxation unless the national
exe
government
mpt
(A) transfers it for the use Impo
ion
of a local government unit. Real sitio
fro
(B) leases the real property (B) leases the real property to a business establishment. (UP LAW COMPLEX & Propert n of
1 m
to a business PHILIPPINE ASSOCIATION y Real 2011
1 real
establishment. OF LAW SCHOOLS) Taxatio Prop
pro
(C) gratuitously allows its n erty
pert
use for educational Tax
y
purposes by a school
tax
established for profit.
(D) sells the property to a
government-owned non-
profit corporation.
Ka Tato owns a parcel of
land in San Jose, Batangas
peri
declared for real property
od
taxation, as agricultural. In
with
1990, he used the land for a
in
poultry feed processing Colle
whi
plant but continued to Real ction
ch
declare the property as (B) No. The deficiency taxes for the period 1990 up to 2011 may still be Propert of
1 to
agricultural. In March 2011, collected within 10 years from March 2011. (UP LAW COMPLEX & PHILIPPINE y real 2011
2 coll
the local tax assessor ASSOCIATION OF LAW SCHOOLS) Taxatio prop
ect
discovered Ka Tato‟s n erty
real
change of use of his land tax
pro
and informed the local
pert
treasurer who demanded
y
payment of deficiency real
tax
property taxes from 1990
to 2011. Has the action
 prescribed? (A) No, the
deficiency taxes may be
collected within five years
from when they fell due. (B)
No. The deficiency taxes for
the period 1990 up to 2011
may still be collected within
10 years from March 2011.
(C) Yes. More than 10 years
had lapsed for the period
1990 up to 2000, hence the
right to collect the
deficiency taxes has
prescribed. (D) Yes. More
than 5 years had lapsed for
the collection of the
deficiency taxes for the
period 1990 up to 2005.
Lualhati Educational
Foundation, Inc., a stock
educational institution
organized for profit, exe
decided to lease for mpt
Impo
commercial use a 1,500 sq. ion
Real sitio
m. portion of its school. The fro
(D) Yes, since the leased portion is not actually, directly, and exclusively used Propert n of
1 school actually, directly, m
for educational purposes. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION y Real 2011
3 and exclusively used the OF LAW SCHOOLS) Taxatio Prop
real
rents for the maintenance pro
n erty
of its school buildings, pert
Tax
including payment of y
janitorial services. Is the tax
leased portion subject to
real property tax?
(A) Yes, since Lualhati is a
 stock and for profit
educational institution.
(B) No, since the school
actually, directly, and
exclusively used the rents
for educational purposes.
(C) No, but it may be
subject to income taxation
on the rents it receives.
(D) Yes, since the leased
portion is not actually,
directly, and exclusively
used for educational
purposes.
Apparently the law does
not provide for the refund
of real property taxes that
have been collected as a
result of an erroneous or
illegal assessment by the Rep
provincial or city assessor. Refu aym
What should be done in nd ent
Real
such instance to avoid an or of
(C)Subsequent adjustment in tax computation and the application of the Propert
1 injustice?(A) Question the credi exce
excess payment to future real property tax liabilities. (UP LAW COMPLEX & y 2011
4 legality of the no-refund PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio
t of ssiv
rule before the Supreme real e
n
Court.(B) Enact a new prop coll
ordinance amending the erty ecti
erroneous or illegal ons
assessment to correct the
error. (C) Subsequent
adjustment in tax
computation and the
application of the excess
 payment to future real
property tax liabilities.(D)
Pass a new ordinance
providing for the refund of
real property taxes that
have been erroneously or
illegally collected

The head priest of the

religious sect Tres Personas
Solo Dios, as the
corporation sole, rented
out a 5,000 sq. m. lot
registered in its name for
use as school site of a exe
school organized for profit. mpt
Impo
The sect used the rentals ion
Real sitio
for the support and upkeep fro
(D) exempt from real property taxes since it is actually, directly, and Propert n of
1 of its priests. The rented lot m
exclusively used for educational purposes. (UP LAW COMPLEX & PHILIPPINE y Real 2011
5 is ASSOCIATION OF LAW SCHOOLS) Taxatio Prop
real
(A) not exempt from real pro
n erty
property taxes because the pert
Tax
user is organized for profit. y
(B) exempt from real tax
property taxes since it is
actually, directly, and
exclusively used for
religious purposes.
(C) not exempt from real
property taxes since it is the
 rents, not the land, that is
used for religious purposes.
(D) exempt from real
property taxes since it is
actually, directly, and
exclusively used for
educational purposes.

Guidant Resources
Corporation, a corporation Wit
registered in Norway, has a h
50 MW electric power plant resp
in San Jose, Batangas. Aside ect
from Guidant's income to
Taxa
from its power plant, which thei
tion
among the following is r
of
considered as part of its inco
resid
income from sources within (A) Gains from the sale to an Ilocos Norte power plant of generators bought Income me
1 ent
the Philippines?(A) Gains from the United States. (UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF Taxatio fro 2011
6 forei
from the sale to an Ilocos LAW SCHOOLS) n m
gn
Norte power plant of sour
corp
generators bought from the ces
orati
United States.(B) Interests with
ons
earned on its dollar in
deposits in a Philippine the
bank under the Expanded Phili
Foreign Currency Deposit ppin
System.(C) Dividends from es
a two-year old Norwegian
 subsidiary with operations
in Zambia but derives 60%
of its gross income from the
Philippines.(D) Royalties
from the use in Brazil of
generator sets designed in
the Philippines by its
engineers.

There is no taxable income

until such income is
recognized. Taxable income
is recognized when the
(A) taxpayer fails to include
Wh
the income in his income
en
tax return.
(C) income has been received, either actually or constructively. (UP LAW Income inco
1 (B) income has been Inco
COMPLEX & PHILIPPINE ASSOCIATION Taxatio me 2011
7 actually received in money OF LAW SCHOOLS) n
me
is
or its equivalent.
taxa
(C) income has been
ble
received, either actually or
constructively.
(D) transaction that is the
source of the income is
consummated.
 Keyrand, Inc., a Philippine
corporation, sold through
the local stock exchange
10,000 PLDT shares that it
bought 2 years ago.
Keyrand sold the shares for
P2 million and realized a
net gain of P200,000.00.
How shall it pay tax on the
transaction?
(A) It shall declare a P2 Taxa
Taxa
million gross income in its tion
tion
income tax return, of
(D) It shall pay a tax of one-half of 1% of the P2 million gross sales. (UP LAW Income of
1 deducting its cost of dom
COMPLEX & PHILIPPINE ASSOCIATION Taxatio capi 2011
8 acquisition as an expense. OF LAW SCHOOLS) n
estic
tal
(B) It shall report the corp
gain
P200,000.00 in its orati
s
corporate income tax ons
return adjusted by the
holding period.
(C) It shall pay 5% tax on
the first P100,000.00 of the
P200,000.00 and 10% tax
on the remaining
P100,000.00.
(D) It shall pay a tax of one-
half of 1% of the P2 million
gross sales.
Passive income includes
Taxa
income derived from an
Income Inco tion
1 activity in which the earner (A) usually suubject to a final tax. (UP LAW COMPLEX & PHILIPPINE
Taxatio me of 2011
9 does not have any ASSOCIATIONOF LAW SCHOOLS)
n Tax pass
substantial participation.
ive
This type of income is(A)
 usually subject to a final inco
tax.(B) exempt from income me
taxation.(C) taxable only if
earned by a citizen.(D)
included in the income tax
return.

Federico, a Filipino citizen,

migrated to the United
States some six years ago
and got a permanent
resident status or green
card. He should pay his
Philippine income taxes on
(A) the gains derived from
the sale in California, U.S.A.
of jewelry he purchased in
the Philippines.
(B) the proceeds he
(C) the gains derived from the sale in the New York Stock Exchange of shares Gros Situ
received from a Philippine Income
2 of stock in PLDT, a Philippine corporation. (UP LAW COMPLEX & PHILIPPINE s s of
insurance company as the Taxatio 2011
0 sole beneficiary of life ASSOCIATION Inco Taxa
n
OF LAW SCHOOLS) me tion
insurance taken by his
father who died recently.
(C) the gains derived from
the sale in the New York
Stock Exchange of shares of
stock in PLDT, a Philippine
corporation.
(D) dividends received from
a two year old foreign
corporation whose gross
income was derived solely
from Philippine sources.
 A corporation may change
its taxable year to calendar
or fiscal year in filing its
annual income tax return,
provided
(A) it seeks prior BIR
Cale
approval of its proposed
ndar
change in accounting Taxa
Income Year
2 period. (A) it seeks prior BIR approval of its proposed change in accounting period. (UP ble
Taxatio / 2011
1 (B) it simultaneously seeks LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Peri
n Fisc
BIR approval of its new od
al
accounting period.
Year
(C) it should change its
accounting period two
years prior to changing its
taxable year.
(D) its constitution and by-
laws authorizes the change.
What is the rule on the
taxability of income that a
government educational
institution derives from its
school operations? Such
Exe
income is(A) subject to 10%
nmp
tax on its net taxable Gros
(B) Exempt from income taxation if it is actually, directly, and exclusively used Income t
2 income as if it is a s
for educational purposes. (UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF Taxatio Cor 2011
2 proprietary educational Inco
LAW SCHOOLS) n pora
institution. (B) Exempt from me
tion
income taxation if it is
s
actually, directly, and
exclusively used for
educational purposes.(C)
subject to the ordinary
income tax rates with
 respect to incomes derived
from educational
activities.(D) Exempt from
income taxation in the
same manner as
government-owned and
controlled corporations.

Alain Descartes, a French

citizen permanently
residing in the Philippines,
received several items
during the taxable year.
Which among the following
is NOT subject to Philippine
income taxation?
(A) Consultancy fees
received for designing a
(A) Consultancy fees received for designing a computer program and installing Gros Situ
computer program and Income
2 the same in the Shanghai facility of a Chinese firm. (UP LAW COMPLEX & s s of
installing the same in the Taxatio 2011
3 Shanghai facility of a PHILIPPINE ASSOCIATION Inco Taxa
n
OF LAW SCHOOLS) me tion
Chinese firm.
(B) Interests from his
deposits in a local bank of
foreign currency earned
abroad converted to
Philippine pesos.
(C) Dividends received from
an American corporation
which derived 60% of its
annual gross receipts from
 Philippine sources for the
past 7 years.
(D) Gains derived from the
sale of his condominium
unit located in The Fort,
Taguig City to another
resident alien.

Income is considered
realized for tax purposes
when
(A) it is recognized as
revenue under accounting
standards even if the law
Wh
does not do so.
en
(B) the taxpayer retires
(D) the earning process is complete or virtually complete and an exchange has Income inco
2 from the business without Inco
taken place. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION Taxatio me 2011
4 approval from the BIR. me
OF LAW SCHOOLS) n is
(C) the taxpayer has been
taxa
paid and has received in
ble
cash or near cash the
taxable income.
(D) the earning process is
complete or virtually
complete and an exchange
has taken place.
 Which among the following
taxpayers is required to use
only the calendar year for
tax purposes?(A)
Partnership exclusively for
the design of government
infrastructure projects
considered as practice of Cale
civil engineering. (B) Joint- Taxa ndar
(A) Partnership exclusively for the design of government infrastructure Income
2 stock company formed for ble Year
projects considered as practice of civil engineering. (UP LAW COMPLEX & Taxatio 2011
5 the purpose of undertaking Peri /Fis
PHILIPPINE ASSOCIATION OF LAW SCHOOLS) n
construction projects. (C) od cal
Business partnership Year
engaged in energy
operations under a service
contract with the
government.(D) Joint
account (cuentas en
participacion) engaged in
the trading of mineral ores.
Taxa
Income from dealings in
tion
property (real, personal, or
of
mixed) is the gain or loss
resid
derived Taxa
ent
(A) only from the cash sales tion
citiz
of property. Income of
2 (D) only from the sale of property. (UP LAW COMPLEX & PHILIPPINE ens,
(B) from cash and Taxatio capi 2011
6 ASSOCIATION OF LAW SCHOOLS) non-
gratuitous receipts of n tal
resid
property. gain
ent
(C) from sale and lease of s
citiz
property.
ens,
(D) only from the sale of
and
property.
resid
 ent
alien
s

In March 2009, Tonette,

who is fond of jewelries,
bought a diamond ring for
P750,000.00, a bracelet for
P250,000.00, a necklace for
P500,000.00, and a brooch
Taxa
for P500,000.00. Tonette
tion
derives income from the
of
exercise of her profession
resid
as a licensed CPA. In
ent
October 2009, Tonette sold
citiz
her diamond ring, bracelet, Ite
ens,
and necklace for only P1.25 miz
Income non-
2 million incurring a loss of (B) Tonette may carry over and deduct her 2009 loss only from her 2010 gain. ed
Taxatio resid 2011
7 P250,000.00. She used the (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
n ent
ded
P1.25 million to buy a solo ucti
citiz
diamond ring in November ons
ens,
2009 which she sold for
and
P1.5 million in September
resid
2010. Tonette had no other
ent
transaction in jewelry in
alien
2010. Which among the
s
following describes the tax
implications arising from
the above transactions?(A)
Tonette may deduct his
2009 loss only from her
2009 professional
 income.(B) Tonette may
carry over and deduct her
2009 loss only from her
2010 gain.(C) Tonette may
carry over and deduct her
2009 loss from her 2010
professional income as well
as from her gain. (D)
Tonette may not deduct her
2009 loss from both her
2010 professional income
and her gain.

Dondon and Helena were

legally separated. They had
six minor children, all
Ded
qualified to be claimed as
ucti
additional exemptions for
ons
income tax purposes. The Gros
Income fro
2 court awarded custody of (D) Two children. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW s
Taxatio m 2011
8 two of the children to SCHOOLS)
n
Inco
Gro
Dondon and three to me
ss
Helena, with Dondon
Inco
directed to provide full
me
financial support for them
as well. The court awarded
the 6th child to Dondon's
 father with Dondon also
providing full financial
support. Assuming that only
Dondon is gainfully
employed while Helena is
not, for how many children
could Dondon claim
additional exemptions
when he files his income
tax return?
(A) Six children.
(B) Five children.
(C) Three children.
(D) Two children.
Political campaign
contributions are NOT
deductible from gross
income (A) if they are not
reported to the Ded
Commission on Elections. ucti
(B) if the candidate ons
Gros
supported wins the election Income fro
2 (C) since they do not help earn the income from which they are to be s
because of possible Taxatio m 2011
9 deducted. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Inco
corruption.(C) since they do n Gro
me
not help earn the income ss
from which they are to be Inco
deducted. (D) since such me
amounts are not
considered as income of
the candidate to whom
given.
 The proceeds received
under a life insurance
endowment contract is NOT
considered part of gross
income
Excl
(A) if it is so stated in the
usio
life insurance endowment
ns
policy. Gros
(C) where payment is made as a result of the death of the insured. (UP LAW Income fro
3 (B) if the price for the s
COMPLEX & PHILIPPINE ASSOCIATION Taxatio m 2011
0 endowment policy was not OF LAW SCHOOLS) n
Inco
Gro
fully paid. me
ss
(C) where payment is made
Inco
as a result of the death of
me
the insured.
(D) where the beneficiary
was not the one who took
out the endowment
contract.
Ded
The excess of allowable
ucti
deductions over gross
ons
income of the business in a Gros
Income fro
3 taxable year is known as (A) net operating loss. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION s
Taxatio m 2011
1 (A) net operating loss. OF LAW SCHOOLS)
n
Inco
Gro
(B) ordinary loss. me
ss
(C) net deductible loss.
Inco
(D) NOLCO.
me
 Pierre de Savigny, a
Frenchman, arrived in the
Philippines on January 1,
2010 and continued to live
and engage in business in
the Philippines. He went on
a tour of Southeast Asia
from August 1 to November
5, 2010. He returned to the
Philippines on November 6,
2010 and stayed until April
15, 2011 when he returned
to France. He earned during
his stay in the Philippines a Kind
gross income of P3 million Income Inco s of
3 (B) a non-resident alien engaged in trade or business in the Philippines. (UP
from his investments in the Taxatio me Tax 2011
2 LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
country. For the year 2010, n Tax pay
Pierre‟s taxable status is ers
that of
(A) a non-resident alien not
engaged in trade or
business in the Philippines.
(B) a non-resident alien
engaged in trade or
business in the Philippines.
(C) a resident alien not
engaged in trade or
business in the Philippines.
(D) a resident alien engaged
in trade or business in the
Philippines.
 The payor of passive
income subject to final tax
is required to withhold the
tax from the payment due
the recipient. The
withholding of the tax has
the effect of (A) a final Wit
Income Inco
3 settlement of the tax (A) a final settlement of the tax liability on the income. (UP LAW COMPLEX & hhol
Taxatio me 2011
3 liability on the income.(B) a PHILIPPINE ASSOCIATIONOF LAW SCHOOLS) ding
n Tax
credit from the recipient's tax
income tax liability.(C)
consummating the
transaction resulting in an
income.(D) a deduction in
the recipient's income tax
return.
Anktryd, Inc., bought a
parcel of land in 2009 for P7
million as part of its
inventory of real properties.
In 2010, it sold the land for
Ded
P12 million which was its
ucti
zonal valuation. In the same
ons
year, it incurred a loss of P6 Gros
(B) Anktryd could deduct its P6 million loss from its P5 million gain. (UP LAW Income fro
3 million for selling another s
COMPLEX & PHILIPPINE ASSOCIATION Taxatio m 2011
4 parcel of land in its Inco
OF LAW SCHOOLS) n Gro
inventory. These were the me
ss
only transactions it had in
Inco
its real estate business.
me
Which of the following is
the applicable tax
treatment?
(A) Anktryd shall be subject
to a tax of 6% of P12
 million.
(B) Anktryd could deduct its
P6 million loss from its P5
million gain.
(C) Anktryd's gain of P5
million shall be subject to
the holding period.
(D) Anktryd's P6 million loss
could not be deducted from
its P5 million gain.

Aplets Corporation is
registered under the laws
of the Virgin Islands. It has
extensive operations in
Southeast Asia. In the
Philippines, Its products are
imported and sold at a
mark-up by its exclusive
distributor, Kim's Trading,
Kind
Inc. The BIR compiled a
(C) No. Aplets is a non-resident foreign corporation not engaged in trade or Income Inco s of
3 record of all the imports of
business in the Philippines. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION Taxatio me Tax 2011
5 Kim from Aplets and OF LAW SCHOOLS) n Tax pay
imposed a tax on Aplets net
ers
income derived from its
exports to Kim. Is the BIR
correct?
(A) Yes. Aplets is a non-
resident foreign
corporation engaged in
trade or business in the
Philippines.
(B) No. The tax should have
 been computed on the
basis of gross revenues and
not net income.
(C) No. Aplets is a non-
resident foreign
corporation not engaged in
trade or business in the
Philippines.
(D) Yes. Aplets is doing
business in the Philippines
through its exclusive
distributor Kim's Trading.
Inc.

In 2009, Spratz, Inc.‟s net

profit before tax was P35
million while its operating
expenses was P31 million. Imp
In 2010, its net profit ositi
before tax was P40 million on
and its operating expenses of
was P38 million. It did not imp
declare dividends for 2009 (B) Yes, since the accumulation is not reasonably necessary for the immediate Income Inco rop
3
and 2010. And it has no needs of the business. (UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW Taxatio me erly 2011
6 proposed capital SCHOOLS) n Tax accu
expenditures for 2011 and mul
the immediate future. May ated
Spratz be subject to the earn
improperly accumulated tax ings
on its retained profits for tax
2009 and 2010?(A) Yes,
since the accumulated
amounts are reasonable for
 operations in relation to
what it usually needed
annually.(B) Yes, since the
accumulation is not
reasonably necessary for
the immediate needs of the
business.(C) No, because
there is no showing that the
taxpayer's 2009 and 2010
net profit before tax
exceeded its paid-up
capital.(D) No, because the
taxpayer is not shown to be
a publicly-listed
corporation, a bank, or an
insurance company.
Zygomite Minerals, Inc., a
corporation registered and
holding office in Australia,
not operating in the
Philippines, may be subject
to Philippine income
taxation on
(A) gains it derived from Gros Situ
(B) gains it derived from sale in Australia of shares of stock of Philex Mining Income
3 sale in Australia of an ore s s of
Corporation, a Philippine corporation. (UP LAW COMPLEX & PHILIPPINE Taxatio 2011
7 crusher it bought from the ASSOCIATION OF LAW SCHOOLS) n
Inco Taxa
Philippines with the me tion
proceeds converted to
pesos.
(B) gains it derived from
sale in Australia of shares of
stock of Philex Mining
Corporation, a Philippine
corporation.
 (C) dividends earned from
investment in a foreign
corporation that derived
40% of its gross income
from Philippine sources.
(D) interests derived from
its dollar deposits in a
Philippine bank under the
Expanded Foreign Currency
Deposit System.

In 2010, Juliet Ulbod earned

P500,000.00 as income
from her beauty parlor and
received P250,000.00 as Sour
Christmas gift from her ces
spinster aunt. She had no of
Gros
other receipts for the year. Income inco
3 (B) P500,000.00. (UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW s
She spent P150,000.00 for Taxatio me 2011
8 SCHOOLS) Inco
the operation of her beauty n subj
me
parlor. For tax purposes, ect
her gross income for 2010 to
is (A) P750,000.00. (B) tax
P500,000.00. (C)
P350,000.00. (D)
P600,000.00.
 The spouses Helena and
Federico wanted to donate
a parcel of land to their son
Dondon who is getting
married in December, 2011.
The parcel of land has a
zonal valuation of
P420,000.00. What is the
most efficient mode of
donating the property?
(A) The spouses should first Split
donate in 2011 a portion of ting
the property valued at Met
P20,000.00 then spread the hod
P400,000.00 equally for for
(C) The spouses should each donate a P110,000.00 portion of the value of the
2012, 2013, 2014 and 2015. the
3 property in 2011 then each should donate P100,000.00 in 2012. (UP LAW Donor’s Tax
(B) Spread the donation com 2011
9 over a period of 5 years by COMPLEX & PHILIPPINE ASSOCIATION Tax Basis
puta
OF LAW SCHOOLS)
the spouses donating tion
P100,000.00 each year from of
2011 to 2015. Don
(C) The spouses should or's
each donate a P110,000.00 Tax
portion of the value of the
property in 2011 then each
should donate P100,000.00
in 2012.
(D) The spouses should
each donate a P100,000.00
portion of the value of the
property in 2011, and
another P100,000.00 each
in 2012. Then, in 2013,
 Helena should donate the
remaining P20,000.00.

Exempted from donor‟s Gift

Exe
taxation are gifts made s
mpti
(A) for the use of the mad
ons
barangay. e to
(A) for the use of the barangay. (UP LAW COMPLEX & PHILIPPINE of
4 (B) in consideration of Donor’s a
ASSOCIATION gifts 2011
0 marriage. Tax polit
OF LAW SCHOOLS) from
(C) to a school which is a ical
dono
stock corporation. sub
r's
(D) to a for-profit divis
tax
government corporation. ion
 Celia donated P110,000.00
to her friend Victoria who
was getting married. Celia
gave no other gift during
the calendar year. What is
the donor's tax implication
on Celia's donation? (A) The
P100,000.00 portion of the
Sch
donation is exempt since
Pers edul
given in consideration of
4 (C) Celia shall pay a 30% donor's tax on the P110,000.00 donation. (UP LAW Donor’s on e of
marriage. (B) A P10,000.00 2011
1 portion of the donation is COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS) Tax liabl Tax
e Rate
exempt being a donation in
s
consideration of
marriage.(C) Celia shall pay
a 30% donor's tax on the
P110,000.00 donation.
(D) The P100,000.00
portion of the donation is
exempt under the rate
schedule for donor's tax.
 Levox Corporation wanted
to donate P5 million as
prize money for the world
professional billiard
championship to be held in
the Philippines. Since the
Billiard Sports
Confederation of the
Philippines does not
recognize the event, it was
held under the auspices of
the International
Professional Billiards Exe
Athl
Association, Inc. Is Levox mpti
ete'
subject to the donor's tax ons
s
on its donation? of
4 (B) Yes, since the national sports association for billiards does not sanction the Donor’s Priz
(A) No, so long as the gifts 2011
2 donated money goes event. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tax es
from
and
directly to the winners and dono
Awa
not through the r's
rds
association. tax
(B) Yes, since the national
sports association for
billiards does not sanction
the event.
(C) No, because it is
donated as prize for an
international competition
under the billiards
association.
(D) Yes, but only that part
that exceeds the first
P100,000.00 of total Levox
 donations for the calendar
year.

A non-stock, non-profit
school always had cash flow
problems, resulting in
Gift
failure to recruit well-
s in
trained administrative
favo
personnel to effectively Exe
r of
manage the school. In 2010, mpti
edu
Don Leon donated P100 ons
cati
million pesos to the school, of
4 (B) Yes, because the donation is to be wholly used for administration Donor’s onal
provided the money shall gifts 2011
3 be used solely for paying purposes. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tax /
from
char
the salaries, wages, and dono
itabl
benefits of administrative r's
e
personnel. The donation tax
insti
represents less than 10% of
tuti
Don Leon's taxable income
ons
for the year. Is he subject to
donor's taxes?(A) No, since
the donation is actually,
 directly, and exclusively
used for educational
purposes.(B) Yes, because
the donation is to be wholly
used for administration
purposes.(C) Yes, since he
did not obtain the requisite
NGO certification before he
made the donation.(D) No,
because the donation does
not exceed 10% of his
taxable income for 2010.

Tong Siok, a Chinese

billionaire and a Canadian
resident, died and left
assets in China valued at
P80 billion and in the
Philippines assets valued at Com
P20 billion. For Philippine Class posi
estate tax purposes the ificat tion
4 allowable deductions for (A) P20 billion. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION Estate ion of
2011
4 expenses, losses, OF LAW SCHOOLS) Tax of Gro
indebtedness, and taxes, Dece ss
property previously taxed, dent Esta
transfers for public use, and te
the share of his surviving
spouse in their conjugal
partnership amounted to
P15 billion. Tong's gross
estate for Philippine estate
 tax purposes is
(A) P20 billion.
(B) P5 billion.
(C) P100 billion.
(D) P85 billion.

Which among the following

reduces the gross estate
(not the net estate) of a
citizen of the Philippines for Excl
purposes of estate Exclu usio
taxation? sions ns
4 (D) Capital of the surviving spouse (UP LAW COMPLEX & PHILIPPINE Estate
(A) Transfers for public use from fro 2011
5 (B) Property previously ASSOCIATION OF LAW SCHOOLS) Tax
estat m
taxed e esta
(C) Standard deduction of te
P1 million
(D) Capital of the surviving
spouse
 Don Fortunato, a widower,
died in May, 2011. In his
will, he left his estate of
P100 million to his four
children. He named his
compadre, Don Epitacio, to
be the administrator of the
estate. When the BIR sent a
demand letter to Don
Epitacio for the payment of
the estate tax, he refused Tim
Time
to pay claiming that he did e
and
not benefit from the estate, and
Tran
he not being an heir. Tran
4 (C) All the four children, the tax to be divided equally among them. (UP LAW Estate sfer
Forthwith, he resigned as sfer 2011
6 administrator. As a result of COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS) Tax of
of
Prop
the resignation, who may Pro
ertie
be held liable for the pert
s
payment of the estate ies
tax?(A) Don Epitacio since
the tax became due prior to
his resignation.(B) The
eldest child who would be
reimbursed by the others.
(C) All the four children, the
tax to be divided equally
among them.(D) The person
designated by the will as
the one liable.
Gerardo died on July 31, Estat
Filin
2011. His estate tax return e
4 (C) six months from the time he died on July 31, 2011. (UP LAW COMPLEX & Estate g of
should be filed within Tax 2011
7 (A) six months from filing of PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tax Ret
Retu
urn
the notice of death. rn
 (B) sixty days from the
appointment of an
administrator.
(C) six months from the
time he died on July 31,
2011.
(D) sixty days from the time
he died on July 31, 2011.
Tong Siok, a Chinese
billionaire and a Canadian
resident, died and left
assets in China valued at
P80 billion and in the
Philippines assets valued at
P20 billion. For Philippine
estate tax purposes the
Com
allowable deductions for
Class posi
expenses, losses,
ificat tion
indebtedness, and taxes,
4 (A) P20 billion. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION Estate ion of
property previously taxed, 2011
8 transfers for public use, and OF LAW SCHOOLS) Tax of Gro
Dece ss
the share of his surviving
dent Esta
spouse in their conjugal
te
partnership amounted to
P15 billion. Tong's gross
estate for Philippine estate
tax purposes is
(A) P20 billion.
(B) P5 billion.
(C) P100 billion.
(D) P85 billion.
 Which among the following
reduces the gross estate
(not the net estate) of a
citizen of the Philippines for Excl
purposes of estate Exclu usio
taxation? sions ns
4 (D) Capital of the surviving spouse (UP LAW COMPLEX & PHILIPPINE Estate
(A) Transfers for public use from fro 2011
9 ASSOCIATION OF LAW SCHOOLS) Tax
(B) Property previously estat m
taxed e esta
(C) Standard deduction of te
P1 million
(D) Capital of the surviving
spouse
Don Fortunato, a widower,
died in May, 2011. In his
will, he left his estate of
P100 million to his four
children. He named his
compadre, Don Epitacio, to
be the administrator of the Tim
Time
estate. When the BIR sent a e
and
demand letter to Don and
Tran
Epitacio for the payment of Tran
5 (C) All the four children, the tax to be divided equally among them. (UP LAW Estate sfer
the estate tax, he refused sfer 2011
0 COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS) Tax of
to pay claiming that he did of
Prop
not benefit from the estate, Pro
ertie
he not being an heir. pert
s
Forthwith, he resigned as ies
administrator. As a result of
the resignation, who may
be held liable for the
payment of the estate
tax?(A) Don Epitacio since
the tax became due prior to
 his resignation.(B) The
eldest child who would be
reimbursed by the others.
(C) All the four children, the
tax to be divided equally
among them.(D) The person
designated by the will as
the one liable.

Gerardo died on July 31,

2011. His estate tax return
should be filed within
(A) six months from filing of
the notice of death. Estat
Filin
(B) sixty days from the e
5 (C) six months from the time he died on July 31, 2011. (UP LAW COMPLEX & Estate g of
appointment of an Tax 2011
1 administrator. PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tax Ret
Retu
urn
(C) six months from the rn
time he died on July 31,
2011.
(D) sixty days from the time
he died on July 31, 2011.
 Tong Siok, a Chinese
billionaire and a Canadian
resident, died and left
assets in China valued at
P80 billion and in the
Philippines assets valued at
P20 billion. For Philippine
estate tax purposes the
Com
allowable deductions for
Class posi
expenses, losses,
ificat tion
indebtedness, and taxes,
5 (A) P20 billion. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION Estate ion of
property previously taxed, 2011
2 OF LAW SCHOOLS) Tax of Gro
transfers for public use, and
Dece ss
the share of his surviving
dent Esta
spouse in their conjugal
te
partnership amounted to
P15 billion. Tong's gross
estate for Philippine estate
tax purposes is
(A) P20 billion.
(B) P5 billion.
(C) P100 billion.
(D) P85 billion.
Which among the following
reduces the gross estate
(not the net estate) of a Excl
citizen of the Philippines for Exclu usio
purposes of estate sions ns
5 (D) Capital of the surviving spouse (UP LAW COMPLEX & PHILIPPINE Estate
taxation? from fro 2011
3 ASSOCIATION OF LAW SCHOOLS) Tax
(A) Transfers for public use estat m
(B) Property previously e esta
taxed te
(C) Standard deduction of
P1 million
 (D) Capital of the surviving
spouse

Don Fortunato, a widower,

died in May, 2011. In his
will, he left his estate of
P100 million to his four
children. He named his
compadre, Don Epitacio, to
be the administrator of the
estate. When the BIR sent a
demand letter to Don
Epitacio for the payment of Tim
Time
the estate tax, he refused e
and
to pay claiming that he did and
Tran
not benefit from the estate, Tran
5 (C) All the four children, the tax to be divided equally among them. (UP LAW Estate sfer
he not being an heir. sfer 2011
4 Forthwith, he resigned as COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS) Tax of
of
Prop
administrator. As a result of Pro
ertie
the resignation, who may pert
s
be held liable for the ies
payment of the estate
tax?(A) Don Epitacio since
the tax became due prior to
his resignation.(B) The
eldest child who would be
reimbursed by the others.
(C) All the four children, the
tax to be divided equally
among them.(D) The person
 designated by the will as
the one liable.

Gerardo died on July 31,

2011. His estate tax return
should be filed within
(A) six months from filing of
the notice of death. Estat
Filin
(B) sixty days from the e
5 (C) six months from the time he died on July 31, 2011. (UP LAW COMPLEX & Estate g of
appointment of an Tax 2011
5 administrator. PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tax Ret
Retu
urn
(C) six months from the rn
time he died on July 31,
2011.
(D) sixty days from the time
he died on July 31, 2011.
 Tong Siok, a Chinese
billionaire and a Canadian
resident, died and left
assets in China valued at
P80 billion and in the
Philippines assets valued at
P20 billion. For Philippine
estate tax purposes the
Com
allowable deductions for
Class posi
expenses, losses,
ificat tion
indebtedness, and taxes,
5 (A) P20 billion. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION Estate ion of
property previously taxed, 2011
6 OF LAW SCHOOLS) Tax of Gro
transfers for public use, and
Dece ss
the share of his surviving
dent Esta
spouse in their conjugal
te
partnership amounted to
P15 billion. Tong's gross
estate for Philippine estate
tax purposes is
(A) P20 billion.
(B) P5 billion.
(C) P100 billion.
(D) P85 billion.
Which among the following
reduces the gross estate
(not the net estate) of a Excl
citizen of the Philippines for Exclu usio
purposes of estate sions ns
5 (D) Capital of the surviving spouse (UP LAW COMPLEX & PHILIPPINE Estate
taxation? from fro 2011
7 ASSOCIATION OF LAW SCHOOLS) Tax
(A) Transfers for public use estat m
(B) Property previously e esta
taxed te
(C) Standard deduction of
P1 million
 (D) Capital of the surviving
spouse

Don Fortunato, a widower,

died in May, 2011. In his
will, he left his estate of
P100 million to his four
children. He named his
compadre, Don Epitacio, to
be the administrator of the
estate. When the BIR sent a
demand letter to Don
Epitacio for the payment of Tim
Time
the estate tax, he refused e
and
to pay claiming that he did and
Tran
not benefit from the estate, Tran
5 (C) All the four children, the tax to be divided equally among them. (UP LAW Estate sfer
he not being an heir. sfer 2011
8 Forthwith, he resigned as COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS) Tax of
of
Prop
administrator. As a result of Pro
ertie
the resignation, who may pert
s
be held liable for the ies
payment of the estate
tax?(A) Don Epitacio since
the tax became due prior to
his resignation.(B) The
eldest child who would be
reimbursed by the others.
(C) All the four children, the
tax to be divided equally
among them.(D) The person
 designated by the will as
the one liable.

Gerardo died on July 31,

2011. His estate tax return
should be filed within
(A) six months from filing of
the notice of death. Estat
Filin
(B) sixty days from the e
5 (C) six months from the time he died on July 31, 2011. (UP LAW COMPLEX & Estate g of
appointment of an Tax 2011
9 administrator. PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tax Ret
Retu
urn
(C) six months from the rn
time he died on July 31,
2011.
(D) sixty days from the time
he died on July 31, 2011.
 In January 2011, the BIR
issued a ruling that
Clemen's vodka imports
were not subject to
increased excise tax based
on his claim that his net
retail price was only P200
per 750 milliliter bottle.
This ruling was applied to
his imports for May, June,
and July 2011. In
September 2011, the BIR
revoked its ruling and
assessed him for deficiency
taxes respecting his May, Taxp
June and July 2011 vodka ayer'
(B) No, because he acted in bad faith when he claimed a lower net retail price TAX Asse
6 imports because it s
than what he actually used. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF REMEDI ssm 2011
0 discovered that his net LAW SCHOOLS) ES
rem
ent
retail price for the vodka edie
was P250 per bottle from s
January to September 2011.
Does the retroactive
application of the
revocation violate Clemen's
right to due process as a
taxpayer?
(A) Yes, since the
presumption is that the BIR
ascertained the facts before
it made its ruling.
(B) No, because he acted in
bad faith when he claimed
a lower net retail price than
what he actually used.
 (C) No, since he could avail
of remedies available for
disputing the assessment.
(D) Yes, since he had
already acquired a vested
right in the favorable BIR
ruling.B34

On July 31, 2011, Esperanza

received a preliminary
assessment notice from the
BIR demanding that she Taxp
pays P180,000.00 ayer'
TAX Asse
6 deficiency income taxes on s
(D) 15 days. (UP LAW COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS) REMEDI ssm 2011
1 her 2009 income. How ES
rem
ent
many days from July 31, edie
2011 should Esperanza s
respond to the notice?(A)
180 days. (B) 30 days.(C) 60
days.(D) 15 days.
 The BIR could not avail
itself of the remedy of levy
and distraint to implement,
through collection, an
assessment that has
become final, executory,
and demandable where Ad
Gove
(A) the subject of the mini
rnm
assessment is an income (B) the amount of the tax involved does not exceed P100.00. (UP LAW TAX stra
6 ent
tax. COMPLEX & PHILIPPINE ASSOCIATION REMEDI tive 2011
2 Rem
(B) the amount of the tax OF LAW SCHOOLS) ES Rem
edie
involved does not exceed edie
s
P100.00. s
(C) the corporate taxpayer
has no other uncollected
tax liability.
(D) the taxpayer is an
individual compensation
income earner.
Which among the following
circumstances negates the
prima facie presumption of
correctness of a BIR
assessment?
Taxp
(A) The BIR assessment was
ayer'
seasonably protested (C) Proof that the assessment is utterly without foundation, arbitrary, and TAX Asse
6 s
within 30 days from receipt. capricious. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION REMEDI ssm 2011
3 rem
(B) No preliminary OF LAW SCHOOLS) ES ent
edie
assessment notice was
s
issued prior to the
assessment notice.
(C) Proof that the
assessment is utterly
without foundation,
 arbitrary, and capricious.
(D) The BIR did not include
a formal letter of demand
to pay the alleged
deficiency.

On March 30, 2005 Miguel

Foods, Inc. received a
notice of assessment and a
letter of demand on its
April 15, 2002 final
adjustment return from the
BIR. Miguel Foods then filed
a request for
reinvestigation together
Taxp
with the requisite
ayer'
supporting documents on (B) Yes. The BIR has 5 years from the issuance of the final assessment within TAX Coll
6 s
April 25, 2005. On June 2, which to collect. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW REMEDI ecti 2011
4 2005, the BIR issued a final rem
SCHOOLS) ES on
edie
assessment reducing the
s
amount of the tax
demanded. Since Miguel
Foods was satisfied with
the reduction, it did not do
anything anymore. On April
15, 2010 the BIR garnished
the corporation's bank
deposits to answer for the
tax liability. Was the BIR
 action proper?(A) Yes. The
BIR has 5 years from the
filing of the protest within
which to collect. (B) Yes.
The BIR has 5 years from
the issuance of the final
assessment within which to
collect. (C) No. The
taxpayer did not apply for a
compromise.(D) No.
Without the taxpayer‟s
prior authority, the BIR
action violated the Bank
Deposit Secrecy Law.

Spanflex Int‟l Inc. received

a notice of assessment from
the BIR. It seasonably filed a
protest with all the
necessary supporting
documents but the BIR Taxp
failed to act on the protest. ayer'
(C) It may wait for the final decision of the BIR on his protest and appeal it to TAX Asse
6 Thirty days from the lapse s
the CTA within 30 days from receipt of such decision. (UP LAW COMPLEX & REMEDI ssm 2011
5 of 180 days from the filing PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ES
rem
ent
of its protest, Spanflex still edie
has not elevated the matter s
to the CTA. What remedy, if
any, can Spanflex take?
(A) It may file a motion to
admit appeal if it could
prove that its failure to
 appeal was due to the
negligence of counsel.
(B) It may no longer appeal
since there is no BIR
decision from which it
could appeal.
(C) It may wait for the final
decision of the BIR on his
protest and appeal it to the
CTA within 30 days from
receipt of such decision.
(D) None. Its right to appeal
to the CTA has prescribed.
Anion, Inc. received a
notice of assessment and a
letter from the BIR
demanding the payment of
P3 million pesos in
deficiency income taxes for
the taxable year 2008. The Com
financial statements of the pro
company show that it has mise
Com
been suffering financial TAX and
6 (C) Anion must waive its right to the secrecy of its bank deposits. (UP LAW pro
reverses from the year REMEDI Abat 2011
6 COMPLEX & PHILIPPINE ASSOCIATIONOF LAW SCHOOLS) mis
2009 up to the present. Its ES eme
e
asset position shows that it nt of
could pay only P500,000.00 Taxe
which it offered as a s
compromise to the BIR.
Which among the following
may the BIR require to
enable it to enter into a
compromise with Anion,
Inc.? (A) Anion must show it
 has faithfully paid taxes
before 2009. (B) Anion
must promise to pay its
deficiency when financially
able. (C) Anion must waive
its right to the secrecy of its
bank deposits. (D) Anion
must immediately deposit
the P500,000.00 with the
BIR.

When a BIR decision

affirming an assessment is
appealed to the CTA, the
BIR's power to garnish the
taxpayer's bank deposits
(A) is suspended to await
the finality of such decision.
Taxp
(B) is suspended given that
ayer'
the CTA can reverse BIR (D) is not suspended since the continued existence of government depends on TAX Coll
6 s
decisions when prejudicial tax revenues. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION REMEDI ecti 2011
7 to the taxpayer. rem
OF LAW SCHOOLS) ES on
edie
(C) is not suspended
s
because only final decisions
of the BIR are subject to
appeal.
(D) is not suspended since
the continued existence of
government depends on tax
revenues.
 Jeopardy assessment is a
valid ground to
compromise a tax liability
(A) involving deficiency Com
income taxes only, but not pro
for other taxes. mise
Com
(B) because of doubt as to TAX and
6 (B) because of doubt as to the validity of the assessment. (UP LAW COMPLEX pro
the validity of the REMEDI Abat 2011
8 & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) mis
assessment. ES eme
e
(C) if the compromise nt of
amount does not exceed Taxe
10% of the basic tax. s
(D) only when there is an
approval of the National
Evaluation Board.
As a general rule, within
what period must a
taxpayer elevate to the
Court of Tax Appeals a
denial of his application for
refund of income tax
overpayment?(A) Within 30
Taxp
days from receipt of the
ayer'
Commissioner‟s denial of (B) Within 30 days from receipt of the denial which must not exceed 2 years TAX
6 s Refu
his application for refund. from payment of income tax. (UP LAW COMPLEX & PHILIPPINE REMEDI 2011
9 rem nd
(B) Within 30 days from ASSOCIATIONOF LAW SCHOOLS) ES
edie
receipt of the denial which
s
must not exceed 2 years
from payment of income
tax.(C) Within 2 years from
payment of the income
taxes sought to be
refunded. (D)
Within 30 days from receipt
 of the denial or within two
years from payment.

What is the effect on the

tax liability of a taxpayer
who does not protest an
assessment for deficiency
taxes?
(A) The taxpayer may
appeal his liability to the
CTA since the assessment is
a final decision of the Taxp
Commissioner on the ayer'
(C) The taxpayer's liability becomes fixed and subject to collection as the TAX Asse
7 matter. s
assessment becomes final and collectible. (UP LAW COMPLEX & PHILIPPINE REMEDI ssm 2011
0 (B) The BIR could already ASSOCIATION OF LAW SCHOOLS) ES
rem
ent
enforce the collection of edie
the taxpayer's liability if it s
could secure authority from
the CTA.
(C) The taxpayer's liability
becomes fixed and subject
to collection as the
assessment becomes final
and collectible.
(D) The taxpayer's liability
 remains suspended for 180
days from the expiration of
the period to protest.

There is prima facie

evidence of a false or
fraudulent return where
the
(A) tax return was amended
after a notice of assessment Taxp
was issued. ayer'
(D) deductions claimed exceed by 30% the actual deductions. (UP LAW TAX Asse
7 (B) tax return was filed s
COMPLEX & PHILIPPINE ASSOCIATION REMEDI ssm 2011
1 beyond the reglementary OF LAW SCHOOLS) ES
rem
ent
period. edie
(C) taxpayer changed his s
address without notifying
the BIR.
(D) deductions claimed
exceed by 30% the actual
deductions.
 No action shall be taken by
the BIR on the taxpayer‟s
disputed issues until the
taxpayer has paid the
deficiency taxes (A)
when the assessment was
issued against a false and Taxp
fraudulent return. ayer'
TAX Asse
7 (B) if there was a failure to (D) attributable to the undisputed issues in the assessment notice. (UP LAW s
REMEDI ssm 2011
2 pay the deficiency tax COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) rem
ES ent
within 60 days from BIR edie
demand. (C) if s
the Regional Trial Court
issues a writ of preliminary
injunction to enjoin the BIR.
(D) attributable to the
undisputed issues in the
assessment notice.
What should the BIR do
when the prescriptive
period for the assessment
of a tax deficiency is about
to prescribe but the
taxpayer has not yet Taxp
complied with the BIR ayer'
TAX Asse
7 requirements for the (C) Issue a jeopardy assessment coupled with a letter of demand. (UP LAW s
REMEDI ssm 2011
3 production of books of COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) rem
ES ent
accounts and other records edie
to substantiate the claimed s
deductions, exemptions or
credits?
(A) Call the taxpayer to a
conference to explain the
delay.
 (B) Immediately conduct an
investigation of the
taxpayer's activities.
(C) Issue a jeopardy
assessment coupled with a
letter of demand.
(D) Issue a notice of
constructive distraint to
protect government
interest.
The taxpayer seasonably
filed his protest together
with all the supporting
documents. It is already
July 31, 2011, or 180 days
from submission of the
protest but the BIR
Taxp
Commissioner has not yet
ayer'
decided his protest. TAX Asse
7 (B) August 30, 2011. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION s
Desirous of an early REMEDI ssm 2011
4 resolution of his protested OF LAW SCHOOLS) rem
ES ent
edie
assessment, the taxpayer
s
should file his appeal to the
Court of Tax Appeals not
later than
(A) August 31, 2011.
(B) August 30, 2011.
(C) August 15, 2011.
(D) August 1, 2011.
 Which of the following are
NOT usually imposed when Stat
there is a tax amnesty? (A) utor
Civil, criminal, and y Civil
TAX
7 administrative penalties (B) (A) Civil, criminal, and administrative penalties (UP LAW COMPLEX & offe Pen
REMEDI 2011
5 Civil and criminal PHILIPPINE ASSOCIATION OF LAW SCHOOLS) nses altie
ES
penalties(C) Civil and and s
administrative penalties(D) pena
Criminal and administrative lties
penalties
In "Operation Kandado,"
the BIR temporarily closed
business establishments,
including New Dynasty
Corporation that failed to
comply with VAT
regulations. New Dynasty
contends that it should not
be temporarily closed since
Ad
it has a valid and existing Gove
mini
VAT registration, it rnm
(D) there was an understatement of taxable sales or receipts by 30% or more TAX stra
7 faithfully issued VAT ent
for the taxable quarter. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION REMEDI tive 2011
6 receipts, and filed the Rem
OF LAW SCHOOLS) ES rem
proper VAT returns. The edie
edie
contention may be rejected s
s
if the BIR investigation
reveals that
(A) the taxpayer has not
been regularly filing its
income tax returns for the
past 4 years.
(B) the taxpayer
deliberately filed a false
and fraudulent return with
 deliberate intention to
evade taxes.
(C) the taxpayer used
falsified documents to
support its application for
refund of taxes.
(D) there was an
understatement of taxable
sales or receipts by 30% or
more for the taxable
quarter.

Mia, a compensation
income earner, filed her
income tax return for the
taxable year 2007 on March
30, 2008. On May 20, 2011,
Mia received an assessment
notice and letter of demand
Taxp
covering the taxable year
(A) No. The 3 year prescriptive period started to run on April 15, 2008, hence, ayer'
2007 but the postmark on TAX Asse
7 it has not yet expired on April 10, 2011. (UP LAW COMPLEX & PHILIPPINE s
the envelope shows April REMEDI ssm 2011
7 10, 2011. Her return is not a ASSOCIATION rem
ES ent
OF LAW SCHOOLS) edie
false and fraudulent return.
s
Can Mia raise the defense
of prescription?
(A) No. The 3 year
prescriptive period started
to run on April 15, 2008,
hence, it has not yet
expired on April 10, 2011.
 (B) Yes. The 3 year
prescriptive period started
to run on April 15, 2008,
hence, it had already
expired by May 20, 2011.
(C) No. The prescriptive
period started to run on
March 30, 2008, hence, the
3 year period expired on
April 10, 2011.
(D) Yes. Since the 3-year
prescriptive period started
to run on March 30, 2008, it
already expired by May 20,
2011.
Real property taxes should
not disregard increases in
the value of real property
Princ
occurring over a long period
General iples Fisc
of time. To do otherwise
Principl of al
7 would violate the canon of (B) fiscal adequacy. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW
es of soun ade 2011
8 a sound tax system referred SCHOOLS)
Taxatio d tax qua
to as(A) theoretical
n syste cy
justice.(B) fiscal
m
adequacy.(C) administrative
feasibility.(D) symbiotic
relationship.
 Which theory in taxation
states that without taxes, a
Theo
government would be
General ry Life
paralyzed for lack of power
Principl and bloo
7 to activate and operate it, (B) Lifeblood theory (UP LAW COMPLEX & PHILIPPINE ASSOCIATION
es of Basis d 2011
9 resulting in its destruction? OF LAW SCHOOLS)
Taxatio of the
(A) Power to destroy theory
n Taxa ory
(B) Lifeblood theory
tion
(C) Sumptuary theory
(D) Symbiotic doctrine
Which among the following
concepts of taxation is the
basis for the situs of income
Theo
taxation? Sym
General ry
(A) Lifeblood doctrine of bioti
Principl and
8 taxation (B) Symbiotic relation in taxation (UP LAW COMPLEX & PHILIPPINE c
es of Basis 2011
0 (B) Symbiotic relation in ASSOCIATION OF LAW SCHOOLS) rela
Taxatio of
taxation tion
n Taxa
(C) Compensatory purpose ship
tion
of taxation
(D) Sumptuary purpose of
taxation
Double taxation in its
general sense means taxing
the same subject twice
during the same taxing
General Doct
period. In this sense, Dou
(C) violates the right to equal protection. (UP LAW COMPLEX & PHILIPPINE Principl rines
8 double taxation ble
ASSOCIATION es of in 2011
1 (A) violates substantive due taxa
OF LAW SCHOOLS) Taxatio Taxa
process. tion
n tion
(B) does not violate
substantive due process.
(C) violates the right to
equal protection.
 (D) does not violate the
right to equal protection.

The power to tax is the

power to destroy. Is this
always so?(A) No. The
Executive Branch may
decide not to enforce a tax Pow
law which it believes to be er
confiscatory. (B) Yes. The to
tax collectors should tax
General Doct
enforce a tax law even if it invo
(D) No. The Supreme Court may nullify a tax law, hence, property rights are Principl rines
8 results to the destruction of lves
not affected. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW es of in 2011
2 the property rights of a SCHOOLS) Taxatio Taxa
the
taxpayer. (C) Yes. Tax laws pow
n tion
should always be enforced er
because without taxes the to
very existence of the State dest
is endangered. (D) roy
No. The Supreme Court
may nullify a tax law,
hence, property rights are
not affected.
 Anne Lapada, a student
activist, wants to impugn
the validity of a tax on text
messages. Aside from
claiming that the law
adversely affects her since
she sends messages by text,
what may she allege that
would strengthen her claim
to the right to file a
taxpayer‟s suit?
(A) That she is entitled to
the return of the taxes
General Doct
collected from her in case (B) That tax money is being extracted and spent in violation of the Tax
Principl rines
8 the court nullifies the tax constitutionally guaranteed right to freedom of communication. (UP LAW pay
es of in 2011
3 measure. COMPLEX & PHILIPPINE ASSOCIATION
Taxatio Taxa
er
(B) That tax money is being OF LAW SCHOOLS) suit
n tion
extracted and spent in
violation of the
constitutionally guaranteed
right to freedom of
communication.
(C) That she is filing the
case in behalf of a
substantial number of
taxpayers.
(D) That text messages are
an important part of the
lives of the people she
represents.
 The actual effort exerted by
the government to effect
the exaction of what is due General
Stag
from the taxpayer is known Principl Coll
8 (D) collection. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION es of
as es of ecti 2011
4 OF LAW SCHOOLS) Taxa
(A) assessment. Taxatio on
tion
(B) levy. n
(C) payment.
(D) collection.
Although the power of
taxation is basically
legislative in character, it is
NOT the function of
Congress to General
Stag
(A) fix with certainty the (B) collect the tax levied under the law. (UP LAW COMPLEX & PHILIPPINE Principl Coll
8 es of
amount of taxes. ASSOCIATION es of ecti 2011
5 Taxa
(B) collect the tax levied OF LAW SCHOOLS) Taxatio on
tion
under the law. n
(C) identify who should
collect the tax.
(D) determine who should
be subject to the tax.
An example of a tax where
the concept of progressivity Acc
finds application is the (A) General ordi
Kind
income tax on individuals. Principl ng
8 (A) income tax on individuals. (UP LAW COMPLEX & PHILIPPINE s of
(B) excise tax on petroleum es of to 2011
6 ASSOCIATIONOF LAW SCHOOLS) taxe
products.(C) value-added Taxatio grad
s
tax on certain articles.(D) n uati
amusement tax on boxing on
exhibitions.
 Importation of goods is
deemed terminated:
(A) When the customs
duties are paid, even if the
goods remain within the
customs premises;
Begi
(B) When the goods are
nnin
released or withdrawn from Requ
g
the customs house upon (B) When the goods are released or withdrawn from the customs house upon irem
Tariff and
payment of the customs payment of the customs duties or with legal permit to withdraw; ents
and endi
1 duties or with legal permit of 2012
Custom ng
to withdraw; According to Section 1202, Tariff and Customs Code impo
s of
(C) When the goods enter (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) rtati
imp
Philippine territory and on
orta
remain within the customs
tion
house within thirty (30)
days from date of entry;
(D) When there is part
payment of duties on the
imported goods located in
the customs area.
A protest against an
assessment issued by the
Collector of Customs for
unpaid customs duties on
imported goods shall be
(D) The Collector of Customs. Tariff
filed with: Rem Tax
and
2 (A) The Commissioner of edie pay 2012
According to Section 2308, Tariff and Customs Code Custom
Customs; s er
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) s
(B) The Regional Trial Court;
(C) The Court of Tax
Appeals;
(D) The Collector of
Customs.
 The dutiable value of an
imported article subject to Ordi
Class
an ad valorem rate of duty (D) The transaction value. nary
Tariff ificat
under existing law shall be: /
and ion
3 (A) The home consumption According to Section 201, Tariff and Customs Code, as amended by RA 8181 regu 2012
Custom of
value; dated March 28, 1996. lar
s duti
(B) The total value; (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) duti
es
(C) The total landed cost; es
(D) The transaction value.
The imported articles shall
in any case be subject to
the regular physical
examination when:
(A) The importer disagrees
with the findings as
contained in the
government surveyor‟s
Ordi
report‟ (B) Class
nary
The number, weight and (B) The number, weight and nature of packages indicated in the customs entry Tariff ificat
/
nature of packages declaration and supporting documents differ from that in the manifest; and ion
4 regu 2012
indicated in the customs According to Sec. 1401, Tariff and Customs Code, as amended by RA 7650.(UP Custom of
lar
entry declaration and LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) s duti
duti
supporting documents es
es
differ from that in the
manifest;
(C) The container is not
leaking or damaged;
(D) The shipment is covered
by alert/hold orders issued
pursuant to an existing
order.
 Which statement is
correct?
(A) Legislative acts passed
by the municipal council in
the exercise of its
lawmaking authority are
denominated as resolutions
auth
and ordinances; Natu
orit
(B) Legislative acts passed re
y to
by the municipal council in (C) Legislative acts passed by the municipal council in the exercise of its Local and
issu
the exercise of its lawmaking authority are denominated as ordinances; Govern Sour
e
5 lawmaking authority are ment ce of 2012
loca
denominated as According to Section 2227, Revised Administrative Code of 1917 Taxatio Taxi
l tax
resolutions; (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) n ng
ordi
(C) Legislative acts passed Pow
nan
by the municipal council in er
ces
the exercise of its
lawmaking authority are
denominated as
ordinances;
(D) Both ordinances and
resolutions are solemn and
formal acts.
Which of the following auth
Natu
statements is NOT a test of orit
re
a valid ordinance? (D) It may prohibit or regulate trade. y to
Local and
(A) It must not contravene issu
Govern Sour
the Constitution or any Explanation: To be valid, an ordinance must not prohibit but may regulate e
6 ment ce of 2012
statute; trade. (Magtajas v. Pryce Properties Corporation, Inc., G.R. No. 111097, July loca
Taxatio Taxi
(B) It must not be unfair or 20, 1994) l tax
n ng
oppressive; (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ordi
Pow
(C) It must not be partial or nan
er
discriminatory; ces
 (D) It may prohibit or
regulate trade.

Taxing power of local

government units shall NOT
extend to the following
taxes, except one:
Com Com
(A) Income tax on banks
mon mon
and other financial
Limit Limi
institutions;
ation tati
(B) Taxes of any kind on the
Local s ons
national government, its (A) Income tax on banks and other financial institutions;
Govern on on
agencies and
7 ment the the 2012
instrumentalities, and local According to Section 186, RA 7160
Taxatio taxin taxi
government units; (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
n g ng
(C) Taxes on agricultural
pow pow
and aquatic products when
ers ers
sold by the marginal
of of
farmers or fishermen;
LGU LGU
(D) Excise taxes on articles
enumerated under the
National Internal Revenue
Code.
 Which statement on
prescriptive periods is true?
Peri
(A) The prescriptive periods
ods
to assess taxes in the
of
National Internal Revenue
asse
Code and the Local
ssm
Government Code are the Taxp
ent
same; ayer'
and
(B) Local taxes shall be s
Local coll
assessed within five (5) rem
(B) Local taxes shall be assessed within five (5) years from the date they Govern ecti
years from the date they edie
8 became due; According to Section 194, RA 7160(UP LAW ment on 2012
became due; s
COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio of
(C) Action for the collection (Loc
n loca
of local taxes may be al
l
instituted after the Taxe
taxe
expiration of the period to s)
s,
assess and to collect the
fees
tax; (D) Local taxes may
and
be assessed within ten (10)
char
years from discovery of the
ges
underpayment of tax which
does not constitute fraud.
The appraisal, assessment,
levy and collection of real
property tax shall be guided
Fund Fun
by the following principles.
(D) The appraisal and assessment of real property shall be based on audited Real ame dam
Which statement does NOT
financial statements of the owner. Propert ntal enta
belong here?
9 y princ l 2012
(A) Real property shall be
According to Section 198, RA 7160 Taxatio iples prin
appraised at its current and
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) n (RPT cipl
fair market value;
) es
(B) Real property shall be
classified for assessment
purposes on the basis of its
 actual use;
(C) Real property shall be
assessed on the basis of a
uniform classification
within each local political
subdivision;
(D) The appraisal and
assessment of real property
shall be based on audited
financial statements of the
owner.

The Manila International

Airport Authority (MIAA) is
exempt from real property
tax. Which statement
below is NOT correct?
(A) MIAA is not a
government-owned or exe
controlled corporation mpt
Impo
because it is not organized ion
(D) MIAA is a government-owned or controlled corporation because it is Real sitio
as a stock or non-stock fro
required to meet the test of economic viability. Propert n of
1 corporation; m
y Real 2012
0 (B) MIAA is a government real
According to MIAA vs. City of Pasay, G.R. No. 163072, April 2, 2009 Taxatio Prop
instrumentality vested with pro
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) n erty
corporate powers and pert
Tax
performing essential public y
services; tax
(C) MIAA is not a taxable
entity because the real
property is owned by the
Republic of the Philippines
and the beneficial use of
such property has not been
 granted to a private entity;
(D) MIAA is a government-
owned or controlled
corporation because it is
required to meet the test of
economic viability.

For purposes of real Impo

property taxes, the tax Real sitio
rates are applied on:(A) Propert n of Rate
1 (C) Assessed values; According to Section 233, RA 7160(UP LAW
Zonal values; (B) Fair y Real s of 2012
1 market value; COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
Taxatio Prop Levy
(C) Assessed values; n erty
(D) Reproduction values, Tax
(A) Bacoor, Cavite; Pow
One of the local
Impo er
government units below
According to Section 200,RA 7160 [Note: The answer above is premised on the Real sitio to
does NOT have the power
belief that Bacoor is a municipality and the LGC does not vest municipalities Propert n of levy
1 to impose real property tax:
with the power to impose real property taxes, except for municipalities within y Real real 2012
2 (A) Bacoor, Cavite; the Metropolitan Manila area. However, Bacoor is already a city hence, can no Taxatio Prop pro
(B) Davao, City;
longer be a correct choice. Since the question did not provide for the CORRECT n erty pert
(C) Tarlac Province;
answer, it should be treated as a bonus.] Tax y
(D) Malabon, Metro Manila.
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) tax
 Where the real property tax
assessment is erroneous,
the remedy of the property
owner is:
(A) To file a claim for refund
in the Court of Tax Appeals
App
if he has paid the tax,
eal
within thirty (30) days from
to
date of payment; Taxp
the
(B) To file an appeal with ayer'
Loca
the Provincial Board of s
(C) To file an appeal with the Provincial Board of Assessment Appeals within Real l
Assessment Appeals within rem
sixty (60) days from receipt of the assessment; Propert Boa
1 thirty (30) days from receipt edie
y rd 2012
3 of the assessment; s
According to Section 226, RA 7160 Taxatio of
(C) To file an appeal with (Real
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) n Asse
the Provincial Board of Prop
sse
Assessment Appeals within erty
men
sixty (60) days from receipt Tax)
t
of the assessment;
App
(D) To file an appeal with
eals
the Provincial Board of
Assessment Appeals within
sixty (60) days from receipt
of the assessment and
paying the assessed tax
under protest.
 The City Government of
Manila may NOT impose:
(A) Basic real property tax
at 2% of the assessed value
of real property;
(B) Additional levy on real
property for the special Pow
education fund at 1% of the Impo er
assessed value of real Local sitio to
(D) Special levy on lands within its territory specially benefited by public works
property; (C) Govern n of levy
1 projects or improvements funded by it at 80% of the actual cost of the
Additional ad valorem tax ment Real real 2012
4 projects or improvements. According to Section 240, Ra 7160(UP LAW
on idle lands at a rate not Taxatio Prop pro
COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
exceeding 5% of the n erty pert
assessed value; (D) Tax y
Special levy on lands within tax
its territory specially
benefited by public works
projects or improvements
funded by it at 80% of the
actual cost of the projects
or improvements.
Mr. Jose Castillo is a Dat
resident Filipino Citizen. He e of
Appr
purchased a parcel of land Effe
aisal
in Makati City in 1970 at a Mr. Castillo shall be liable to the real property tax based on the re-assessment ctivi
and
consideration of P1 Million. beginning 2012. All re-assessments made after the first day of any year shall Real ty of
asse
In 2011, the land , which take effect on the first day of January of the succeeding year (Section Propert Asse
1 ssme
remained undeveloped and 221,LGC). [Note: The question is misleading. Mr. Castillo is liable to the real y ssm 2012
5 nt of
idle, had a fair market value property tax on the property when he became the owner thereof although his Taxatio ent
real
of P20Million. Mr. Antonio liability increases upon re-assessment of the property.] n or
prop
Ayala, another Filipino (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Rea
erty
citizen, is very much sses
tax
interested in the property sme
and he offered to buy the nt
 same for P20 Million. The
Assessor of Makati City re-
assessed in 2011 the
property at P10 Million.

When is Mr. Castillo liable

for real property tax on the
land beginning 2011 or
beginning 2012? Explain
your answer. (2%)

Income from the

performance of service is
treated as income from
within the Philippines, if:
(A) The payment of
compensation for the
service is made in the
(C) The service is actually performed in the Philippines; Gros Situ
Philippines; Income
1 s s of
(B) The contract calling for Taxatio 2012
6 the performance of service According to Section 42, NIRC Inco Taxa
n
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) me tion
is signed in the Philippines;
(C) The service is actually
performed in the
Philippines;
(D) The recipient of service
income is a resident of the
Philippines.
 For income tax purposes,
the source of the service
income is important for the
taxpayer, who is a:
(A) Filipino citizen residing
in Makati City; (B) Non-resident Filipino citizen working and residing in London, United
Gros Situ
(B) Non-resident Filipino Kingdom; According to: Section 23 in relation to Section 42, Income
1 s s of
citizen working and residing NIRC [NOTE: C is also a correct answer considering that resident aliens are also Taxatio 2012
7 Inco Taxa
in London, United Kingdom; taxable only on income derived from within the Philippines](UP LAW n
me tion
(C) Japanese citizen who is COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
married to a Filipina citizen
and residing in their family
home located in Fort
Bonifacio, Taguig City;(D)
Domestic corporation.
Interest income of a
domestic commercial bank
derived from a peso loan to
a domestic corporation in Taxa
2010 is: tion
(A) Subject to the 30% (A) Subject to the 30% income tax based on its net taxable income; of
Income Inco
1 income tax based on its net dom
Taxatio me 2012
8 taxable income; According to Section 27 (A) estic
n Tax
(B) Subject to the 20% final (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) corp
withholding tax; orat
(C) Subject to the 7.5% ions
final withholding tax;
(D) Subject to 10% final
withholding tax.
 A resident foreign
corporation is one that is:
(A) Organized under the
laws of the Philippines that
does business in another
country;
(B) Organized under the
laws of a foreign country
that sets up a regional (D) Organized under the laws of a foreign country that engages in business in Kind
headquarter in the Makati City, Philippines. Income Inco s of
1
Philippines doing product Taxatio me taxp 2012
9
promotion and information According to Section 22(H), NIRC n Tax ayer
dissemination; (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) s
(C) Organized under the
laws of the Philippines that
engages business in special
economic zone;
(D) Organized under the
laws of a foreign country
that engages in business in
Makati City, Philippines.
A dealer in securities sold
unlisted shares of stocks of
a domestic corporation in
Taxa
2010 and derived a gain of Taxa
tion
P1 Million therefrom. The tion
of
gain is: (A) Taxable at 30% (A) Taxable at 30% regular corporate income tax based on net taxable income; Income of
2 dom
regular corporate income According to Section 22(U) in relation to Section 27, NIRC(UP LAW COMPLEX & Taxatio capi 2012
0 estic
tax based on net taxable PHILIPPINE ASSOCIATION OF LAW SCHOOLS) n tal
corp
income; gain
orati
(B) Taxable at 5%/10% s
ons
capital gains tax based on
net capital gain; (C) Taxable
at ½ of 1% stock transaction
 tax based on the gross
selling price or fair market
value, whichever is higher
(D) Exempt from income
tax.

An individual, who is a real

estate dealer, sold a
residential lot in Quezon Taxa
City at a gain of tion
P100,000.00 (selling price of
of P900,000.00 and cost is resid
P800,000.00). The sale is ent
subject to income tax as citiz Taxa
follows: (C) Ordinary income tax at the graduated rates of 5% to 32% of net taxable ens, tion
(A) 6% capital gains tax on income; Income non- of
2
the gain; Taxatio resid capi 2012
1
(B) 6% capital gains tax on According to Section 24, NIRC n ent tal
the gross selling price or (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) citiz gain
fair market value, ens, s
whichever is higher; and
(C) Ordinary income tax at resid
the graduated rates of 5% ent
to 32% of net taxable alien
income; s
(D) 30% income tax on net
taxable income.
 During the audit conducted
by the BIR official, it was
found that the rental
income claimed by the
corporation was not
subjected to expanded
withholding tax.
Accordingly, the claimed
rental expense:
(A) Is deductible from the
gross income of the
Ded
corporation, despite non-
ucti
withholding of income tax
(C) Is not deductible from gross income of the corporation due to non- on
by the corporation; Gros
withholding of tax; Income fro
2 (B) Is deductible from the s
Taxatio m 2012
2 gross income of the According to Section 34(K), NIRC n
Inco
Gro
corporation, provided that me
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ss
the 5% expanded
Inco
withholding tax is paid by
me
the corporation during the
audit;
(C) Is not deductible from
gross income of the
corporation due to non-
withholding of tax;
(D) Is deductible, if it can be
shown that the lessor has
correctly reported the
rental income in his tax
return.
 A general professional
partnership (GPP) is one:
(A) That is registered as
such with the Securities and
Exchange Commission and
the Bureau of Internal
Revenue; (B) That Gen
is composed of individuals (C) That exclusively derives income from the practice of the common eral
Kind
who exercise a common profession; According to Section 26, NIRC [Note:The prof
Income s of
2 profession; question is unfair because it gives an initial impression that the examiner is essi
Taxatio Taxp 2012
3 (C) That exclusively derives asking the statement which best characterizes a GPP but the real question is onal
n ayer
income from the practice of found after the enumeration of the choices which might not be noticed by the part
s
the common profession; examinee.](UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ners
(D) That derives hips
professional income and
rental income from
property owned by it.
Which statement above
does NOT properly refer to
a GGP?
The interest expense of a
domestic corporation on a
bank loan in connection
Ded
with the purchase of a
ucti
production equipment:
(B) Is deductible from the gross income of the borrower-corporation during on
(A) Is not deductible from Gros
the year or it may be capitalized as part of cost of the equipment; Income fro
2 gross income of the s
Taxatio m 2012
4 borrower corporation; Inco
According to Section 34(B)(3), NIRC n Gro
(B) Is deductible from the me
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ss
gross income of the
Inco
borrower-corporation
me
during the year or it may be
capitalized as part of cost of
the equipment;
 (C) Is deductible only for a
period of five years from
date of purchase;
(D) Is deductible only if the
taxpayer uses the cash
method of accounting.

The “all events test” refers

to:
(A) A person who uses the (C) A person who uses the accrual method, whereby an expense is deductible
cash method where all sales for the taxable year in which all the events had occurred which determined Test
have been fully paid by the the fact of the liability and the amount thereof could be determined with s in
buyers thereof; reasonable accuracy; Explanation: The accrual of income dete
(B) A person who uses the and expense is permitted when the all-events test has been met. This test rmi
instalment sales method, requires: (1) fixing of a right to income or liability to pay; and (2) the ning
where the full amount of availability of the reasonable accurate determination of such income or whe
consideration is paid in full liability. The all-events test requires the right to income or liability be fixed, ther
by the buyer thereof within and the amount of such income or liability be determined with reasonable Income inco
2 Inco
the year of sale;(C) A accuracy. However, the test does not demand that the amount of income or Taxatio me 2012
5 person who uses the me
liability be known absolutely, only that a taxpayer has at his disposal the n is
accrual method, whereby information necessary to compute the amount with reasonable accuracy. The earn
an expense is deductible for all-events test is satisfied where computation remains uncertain, if its basis is ed
the taxable year in which all unchangeable; the test is satisfied where a computation may be unknown, but for
the events had occurred is not as much unknowable, within the taxable year. The amount of liability tax
which determined the fact does not have to be determined exactly; it must be determined with pur
of the liability and the “reasonable accuracy.” (Commissioner of Internal Revenue vs. Isabela Cultural pos
amount thereof could be Corporation, G.R. No. 172231 February 12, 2007)(UP LAW COMPLEX & es
determined with PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
reasonable accuracy;(D) A
person who uses the
 completed method,
whereby the construction
project has been completed
during the year the contract
was signed.

All the items below are

excluded from gross
income, except:
(A) Gain from sale of long- Excl
term bonds, debentures usio
and indebtedness; (D) Separation pay received by a retiring employee under a voluntary ns
Gros
(B) Value of property retirement program of the corporate employer. Income fro
2 s
received by a person as Taxatio m 2012
6 donation or inheritance; Inco
According to Section 32(B)(6) n Gro
me
(C) Retirement benefits (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ss
received from the GSIS, SSS, Inco
or accredited retirement me
plan;
(D) Separation pay received
by a retiring employee
 under a voluntary
retirement program of the
corporate employer.

Which statement is
correct? A non-stock, non-
profit charitable association
that sells its idle agricultural
property is: (A)
Not required to file an
income tax return, nor pay
income tax one the Sour
transaction to the BIR, ces
provided the sales proceeds of
(B) Required to pay the 6% capital gains tax on the gross selling price or fair Gros
are invested in another real Income inco
2 market value, whichever is higher; According to s
estate during the year; Taxatio me 2012
7 (B) Required to pay the 6% Section 30, NIRC(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW Inco
n subj
SCHOOLS) me
capital gains tax on the ect
gross selling price or fair to
market value, whichever is tax
higher; (C)
Mandated to pay the 30%
regular corporate income
tax on the gain from sale;
(D) Required to withhold
the applicable expanded
withholding tax rate on the
 transaction and remit the
same to the BIR.

ABS Corporation is a PEZA-

registered export
enterprise which
manufactures cameras and
sells all its finished products
abroad. Which statement is
NOT correct?
(A) ABS Corporation is Taxa
subject to the 5% final tax tion
(A) ABS Corporation is subject to the 5% final tax on gross income earned, in
on gross income earned, in of
lieu of all national and local taxes; Income Tax
2 lieu of all national and local dom
Taxatio pay 2012
8 taxes; estic
According to Sections 23 & 24, RA 7916 n able
(B) ABS Corporation is corp
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
exempt from the 30% orati
corporate income tax on ons
net income, provided it
pays value added tax.
(C) ABS Corporation is
subject to the 30%
corporate income tax on
net income;
(D) ABS Corporation is
 exempt from all national
and local taxes, except real
property tax.

In 2006, Mr. Vicente Tagle,

a retiree, bought 10,000
CDA shares that are
Taxa
unlisted in the local stock
tion
exchange for P10 per share.
of
In 2010, the said shares had
resid
a book value per share of
ent
P60 per share. In view of a
citiz Taxa
car accident in 2010, Mr.
(C) 5%/10% capital gains tax on the capital gain from sale of P40 per share ens, tion
Vicente Tagle had to sell his
(P50 selling price less P10 cost) plus donor’s tax on the excess of the fair Income non- of
2 CDA shares but he could
market value of the shares over the consideration; According Taxatio resid capi 2012
9 sell the same only for P50
to Section 24(C) in relation to Section 100, NIRC; RR No. 6-2008(UP LAW n ent tal
per share. The sale is
COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) citiz gain
subject to tax as follows:
ens, s
(A) 5%/10% capital gains
and
tax on the capital gain from
resid
sale of P40 per share (P50
ent
selling price less P10 cost);
alien
(B) 5/%10% capital gains tax
s
on the capital gain of P50
per share, arrived at by
deducting the cost (P10 per
share) from the book value
(P60 per share);
(C) 5%/10% capital gains tax
on the capital gain from
sale of P40 per share (P50
selling price less P10 cost)
plus donor’s tax on the
excess of the fair market
value of the shares over the
consideration;
(D) Graduated income tax
rates of 5% to 32% on the
net taxable income from
the sale of the shares.
 X Corporation had excess
income tax payment for the
year 2008, which it chose to
carryover in 2009. In filing
its 2009 corporate income
tax return, it signified its
intention (by checking the
small box “refund” at the
bottom of the return) to get
a refund of the overpaid
amount in 2008. Can the
refund be allowed or not, (B) X Corporation may not get the refund in 2009, but the amount being
and if disallowed, does X claimed as refund may be utilized in succeeding years until fully exhausted
Corporation lose the because there is no prescriptive period for carryover of excess income tax Taxa
claimed amount? payments; tion
(A) X Corporation may not of Taxa
Income
3 get the refund because the According to Section 76, NIRC The carryover of excess income tax payments is dom ble
Taxatio 2012
0 decision to carryover in no longer limited to the succeeding taxable year. Unutilized excess income tax
n
estic Peri
2008 was irrevocable for payments may now be carried over to the succeeding taxable years until fully corp od
that year, and it may not utilized. In addition, the option to carryover excess income tax payments is orati
change that decision in now irrevocable. Hence, unutilized excess income tax payments may no longer ons
succeeding years; be refunded. (Belle Corp. v. CIR, G.R. No. 181298, January 10, 2011)
(B) X Corporation may not (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
get the refund in 2009, but
the amount being claimed
as refund may be utilized in
succeeding years until fully
exhausted because there is
no prescriptive period for
carryover of excess income
tax payments;
(C) X Corporation may get
the refund, provided that it
will no longer carryover
 such amount or utilize the
same against its income tax
liability in the future;
(D) X Corporation may file
instead a claim of tax credit,
in lieu of refund.

Mr. Pedro Aguirre, a

resident citizen, is working
for a large real estate
development company in The old car is a capital asset. It is property held by the taxpayer (whether or Sour
the country and in 2010, he not connected with his trade or business), but is not stock in trade of the ces
was promoted to Vice- taxpayer or other property of a kind which would properly be included in the of
Gros
President of the company. inventory of the taxpayer if on hand at the close of the taxable year, or Income Inco
3 s
With more responsibilities property held by the taxpayer primarily for sale to customers in the ordinary Taxatio me 2012
1 comes higher pay. In 2011, Inco
course of his trade or business, or property used in the trade or business, of a n Subj
me
he decided to buy a new car character which is subject to the allowance for depreciation; or real property ect
worth P2 Million and he used in trade or business of the taxpayer (Section 39, NIRC).(UP LAW to
traded-in his old car with a COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) tax
market value of
P800,000.00 and paid the
difference of P1.2 Million to
 the car company. The old
car, which was bought
three (3) years ago by the
father of Mr. Pedro Aguirre
at price of P700,000.00 was
donated by him and
registered in the name of
his son. The corresponding
donor’s tax thereon was
duly paid by the
father.What is the nature
of the old car – capital
asset or ordinary asset?
Explain your answer. (3%)
Mr. Pedro Aguirre, a
resident citizen, is working
Taxa
for a large real estate
tion
development company in
of
the country and in 2010, he
resid
was promoted to Vice-
ent
President of the company.
citiz Taxa
With more responsibilities
ens, tion
comes higher pay. In 2011,
Yes, Capital gain is P100,000. The amount of the taxable gain is subject to the Income non- of
3 he decided to buy a new car
holding period of the asset (Section 39, NIRC) Taxatio resid capi 2012
2 worth P2 Million and he (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) n ent tal
traded-in his old car with a
citiz gain
market value of
ens, s
P800,000.00 and paid the
and
difference of P1.2 Million to
resid
the car company. The old
ent
car, which was bought
alien
three (3) years ago by the
s
father of Mr. Pedro Aguirre
at price of P700,000.00 was
 donated by him and
registered in the name of
his son. The corresponding
donor’s tax thereon was
duly paid by the father.

Is Mr. Aguirre liable to pay

income tax on the gain
from the sale of his old
car? Explain your answer.
(5%)

Spouses Pablo Gonzales

and Teresita Gonzales, both
resident citizens acquire
during their marriage a
residential house and lot
located in Makati City,
which is being leased to a Sour
tenant for a monthly rental ces
of P100,000.00. Mr. Pablo of
Yes. Income to be declared: P600,000 (Rental Income P300,000 & Salary Gros
Gonzales is the President of Income inco
3 P300,000); Personal and Additional Exemption P75,000 (Basic of P50,000 & s
PG Corporation and he Taxatio me 2012
3 P25,000 for one minor child)(UP LAW COMPLEX & PHILIPPINE ASSOCIATION Inco
receives P50,000.00 salary n subj
OF LAW SCHOOLS) me
per month. The spouses ect
have only one (1) minor to
child. In late June 2010, he tax
was immediately brought
to the hospital because of
the heart attack and he was
pronounced dead on June
30, 2010.With no liabilities,
the estate of the late Pablo
 Gonzales was settled extra-
judicially in early 2011.Is
Mr. Pablo Gonzales
required to file income tax
for 2010? If so, how much
income must he declare for
the year? How much
personal and additional
exemption is he entitled
to? Explain your answer.
(5%)

Spouses Pablo Gonzales

and Teresita Gonzales, both
resident citizens acquire
during their marriage a
residential house and lot
located in Makati City,
Sour
which is being leased to a
ces
tenant for a monthly rental Yes. Rental Income P600,000 (P300,000 share for January to June 2010 &
of
of P100,000.00. Mr. Pablo P300,000 representing his interest in the income from the properties Gros
Income inco
3 Gonzales is the President of comprising the estate for the period July to December). The share of the s
Taxatio me 2012
4 PG Corporation and he minor child in the rental income (P300,000) earned after death is not included
n
Inco
subj
receives P50,000.00 salary in the return of the parent pursuant to Section 51(E) of the Tax Code. me
ect
per month. The spouses (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
to
have only one (1) minor
tax
child. In late June 2010, he
was immediately brought
to the hospital because of
the heart attack and he was
pronounced dead on June
30, 2010.With no liabilities,
 the estate of the late Pablo
Gonzales was settled extra-
judicially in early 2011.

Is Mrs. Teresita Gonzales

required to file income tax
return fot 2010? If so, how
much income must she
declare for the year? How
much personal exemption
is she entitled to? Explain
your answer. (5%)

Spouses Pablo Gonzales

and Teresita Gonzales, both
resident citizens acquire
during their marriage a
residential house and lot
located in Makati City,
which is being leased to a
tenant for a monthly rental
No. It has acquired no tax personality because the estate is not under judicial Kind Esta
of P100,000.00. Mr. Pablo
settlement. The income of the properties is taxable to the heirs in their Income s of tes
3 Gonzales is the President of
individual capacity in accordance with their respective interest in the Taxatio taxp and 2012
5 PG Corporation and he inheritance. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW n ayer trus
receives P50,000.00 salary
SCHOOLS) s ts
per month. The spouses
have only one (1) minor
child. In late June 2010, he
was immediately brought
to the hospital because of
the heart attack and he was
pronounced dead on June
30, 2010.With no liabilities,
 the estate of the late Pablo
Gonzales was settled extra-
judicially in early 2011.Is
the Estate of the late Pablo
Gonzales required to file
income tax return for
2010? If so, how much
income must it declare for
the year? How much
personal exemption is it
entitled to? Explain your
answer. (5%)

Mr. Pedro Aguirre, a

resident citizen, is working
Taxa
for a large real estate
tion
development company in
of
the country and in 2010, he
resid
was promoted to Vice-
ent Ded
President of the company.
citiz ucti
With more responsibilities
ens, ons
comes higher pay. In 2011,
P700,000. The basis of the property in the hands of the donee is the carry- Income non- fro
3 he decided to buy a new car
over basis (Section 40 (B)(3), NIRC) Taxatio resid m 2012
6 worth P2 Million and he (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) n ent gros
traded-in his old car with a
citiz s
market value of
ens, inco
P800,000.00 and paid the
and me
difference of P1.2 Million to
resid
the car company. The old
ent
car, which was bought
alien
three (3) years ago by the
s
father of Mr. Pedro Aguirre
at price of P700,000.00 was
 donated by him and
registered in the name of
his son. The corresponding
donor’s tax thereon was
duly paid by the father.

How much is the cost basis

of the old car to Mr.
Aguirre? Explain your
answer (2%)

Anchor Banking
Corporation, which was
organized in 2000 and
existing under the laws of
the Philippines and owned
by the Sy Family of Makati
City, set up in 2010 a
branch office in Shanghai
No. A Domestic Corporation is taxable on all income derived from sources
City, China, to take Kind
within and without the Philippines (Section 23, NIRC). The income of the
advantage of the presence Income Inco s of
3 foreign branch and that of the Home Office will be summed up for income tax
of many Filipino workers in Taxatio me taxp 2012
7 purposes following the “single entity” concept and will all be included in the
that area and its booming n Tax ayer
gross income of the domestic corporation in the annual Philippine income tax
economy. During the year, s
return.(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
the bank ,management
decided not to include the
P20 Million net income of
the Shanghai Branch in the
annual Philippine income
tax return filed with the
BIR, which showed a net
taxable income of P30
Million , because the
Shanghai Branch is treated
as a foreign corporation
and is taxed only on income
from sources within the
Philippines, and since the
loan and other business
transactions were done in
Shanghai, these incomes
are not taxable in the
PhilippinesIs the bank
correct in excluding the net
income of its Shanghai
Branch in the computation
of its annual corporate
income tax for 2010?
Explain your answer. (5%)
 Anchor Banking
Corporation, which was
organized in 2000 and
existing under the laws of
the Philippines and owned
by the Sy Family of Makati
City, set up in 2010 a
branch office in Shanghai
City, China, to take
advantage of the presence
of many Filipino workers in
that area and its booming
economy. During the year,
the bank ,management
decided not to include the Exclu Excl
No. The branch profit remittance tax is imposed only on remittances by
P20 Million net income of ded ude
branches of Foreign Corporation in the Philippines to their Home Office Income
3 the Shanghai Branch in the in d in
abroad. It is the outbound branch profits that is subject to the tax not the Taxatio 2012
8 annual Philippine income inbound profits (Section 28(A)(5), NIRC). n
the the
tax return filed with the sylla sylla
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
BIR, which showed a net bus bus
taxable income of P30
Million , because the
Shanghai Branch is treated
as a foreign corporation
and is taxed only on income
from sources within the
Philippines, and since the
loan and other business
transactions were done in
Shanghai, these incomes
are not taxable in the
Philippines

Should the Shanghai

Branch of Anchor Bank
remit profit to its Head
Office in the Philippines in
2011, is the branch liable
to the 15% branch profit
remittance tax imposed
under Section 28 (A)(5) of
the 1997 Tax Code? Explain
your answer (5%)
 Foster Corporation (FC) is a
Singapore-based foreign
corporation engaged in
construction and
installation projects. In
2010, Global Oil
Corporation (GOC), a
domestic corpoartion
engaged in the refinery of
petroleum products,
awarded an anti-pollution No. FC is not liable to Philippine income tax. The revenues from the design and
project to Foster supply contracts having been all done in Singapore are income from without,
Corporation, whereby FC hence, not taxable to a foreign corporation in the Philippines (Section 42,
shall design, supply NIRC; CIR v. Marubeni Corporation, G.R. No. 137377, December 18, 2001).
machinery and equipment, Also, With respect to the installation of the project which are services
and install an anti-pollution performed within, the same is sub-contracted to PCC, a domestic corporation. Gros Situ
Income
3 device for GOC’s refinery in Since FC has no branch or permanent establishment in the Philippines, s s of
Taxatio 2012
9 the Philippines, provided business profits earned by it pursuant to our treaty with Singapore are exempt
n
Inco Taxa
that the installation part of from income tax. [Note: if the examinee answered that the offshore portion of me tion
the project may be sub- the contract (design and supply) is not taxable in the Philippines while the
contracted to a local onshore portion (installation) is taxable invoking the source rules, it should be
construction company. given full credit. The question might be too technical for students and
Pursuant to the contract, expected new entrants to tax practice to discern.](UP LAW COMPLEX &
the design and supply PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
contracts were done in
Singapore by FC, while the
installation works were sub-
contracted by the FC with
the Philippine Construction
Corporation (PCC), a
domestic corporation. The
project with a total cost of
P100 Million was
completed in 2011 at the
following cost components:
(design – P20Million;
machinery and equipment
– P50 Million; and
installation –P30 Million).
Assume that the project
was 40% complete in 2010
and 100% complete in
2011, based on the
certificates issued by the
certificates issued by the
architects and engineers
working on the project.
GOC paid FC as follows: P60
Million in 2010 and P40
Million in 2011, and FC paid
PCC ion foreign currency
through a Philippine bank
as follows: P10 Million in
2010 and P20 Million in
2011.Is FC liable to
Philippines income tax, and
if so, how much revenue
shall be reported by it in
2010 and in 2011? Explain
your answer. (5%)
 On April 16, 2012, the
corporation filed its annual
corporate income tax
return for 2011, showing an
overpayment of income tax
of P1 Million. Which is to be
carried over to the
succeeding year(s). On May
15, 2012, the corporation
sought advice from you and
said that it contemplates to
file an amended return for
2011, which shows that
instead of carry over of the Fina
execss income tax payment, Once the option to carry-over and apply the excess quarterly income tax l
the same shall be against income tax against income tax due for the taxable quarters of the Taxa Adju
Income
4 considenred as a claim for succeeding taxable years has been made such option shall be considered ble stm
Taxatio 2012
0 tax refund and the small IRREVOCABLE for the taxable year period and no application for tax refund or
n
Peri ent
box shown as "refund" in issuance of tax credit certificate shall be allowed therefore (Section 76, od Ret
the return will be filled up. NIRC).(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) urn
Withi a year, the *
corporation will file the
formal request for refund
for the excess payment.Will
you recommend to the
corporation such a course
of action and justify that
the amended return is the
latest official act of the
corporation as to how it
may treat such
overpayment of tax or
should you consider the
option granted to
 taxpayers as irrevocable,
once previously exercised
by it? Explain your answer.
(5%)

On April 16, 2012, the

corporation filed its annual
corporate income tax
return for 2011, showing an
overpayment of income tax
of P1 Million. Which is to be Fina
Yes. The carry-over of excess income tax payments is no longer limited to the
carried over to the l
succeeding taxable year. Unutilized excess income tax payments may now be
succeeding year(s). On May Taxa Adju
carried over to the succeeding taxable years until fully utilized. In addition, the Income
4 15, 2012, the corporation ble stm
option to carry-over excess income tax payments is now irrevocable. Hence, Taxatio 2012
1 sought advice from you and unutilized excess income tax payments may no longer be refunded (Belle n
Peri ent
said that it contemplates to od Ret
Corp. v. CIR, G.R. No. 181298, January 10, 2011).
file an amended return for urn
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
2011, which shows that *
instead of carry over of the
execss income tax payment,
the same shall be
considenred as a claim for
tax refund and the small
box shown as "refund" in
the return will be filled up.
Withi a year, the
corporation will file the
formal request for refund
for the excess payment.

Should the petition for

review filed with the CTA
on the basisof the
amended tax return be
denied by the BIR and the
CTA, could the
corporationstill carry over
such excess payment of
income tax in the
succeeding years,
considering that there is no
precriptive period provided
for in the income tax law
with respect to carry over
of excess income tax
payments? Explain your
answer. (5%)
 Mr. Jose Castillo is a
resident Filipino Citizen. He
purchased a parcel of land
in Makati City in 1970 at a
consideration of P1 Million.
In 2011, the land , which
remained undeveloped and
idle, had a fair market value
Wh
of P20Million. Mr. Antonio
No. Mr. Castillo is not liable for income tax in 2011 because no income is en
Ayala, another Filipino
realized by him during that year. Tax liability for income tax attaches only if Income inco
4 citizen, is very much Inco
there is a gain realized resulting from a closed and complete transaction Taxatio me 2012
2 interested in the property (Madrigal v. Rafferty, G.R. No. L-12287, August 7, 1918).(UP LAW COMPLEX & n
me
is
and he offered to buy the
PHILIPPINE ASSOCIATION OF LAW SCHOOLS) taxa
same for P20 Million. The
ble
Assessor of Makati City re-
assessed in 2011 the
property at P10 Million.Is
Mr. Castillo liable for
income tax in 2011 based
on the offer to buy by Mr.
Ayala? Explain your
answer. (3%)
 Mr. Jose Castillo is a
resident Filipino Citizen. He
purchased a parcel of land
in Makati City in 1970 at a
consideration of P1 Million.
In 2011, the land , which
remained undeveloped and
idle, had a fair market value
Taxa
of P20Million. Mr. Antonio
tion
Ayala, another Filipino
of
citizen, is very much He shall be liable to pay the 6% capital gains tax (CGT) based on the Gross
resid
interested in the property Selling Price of the Property which is P20 Million plus the CGT assumed by the
ent
and he offered to buy the buyer. He should file the return within 30 days from date of the sale (date of
citiz Taxa
same for P20 Million. The notarization) and shall pay the tax as he files the return (Section 24(D), NIRC).
ens, tion
Assessor of Makati City re- or
Income non- of
4 assessed in 2011 the The income tax due on the transaction is P1,276,595.74 which is computed as
Taxatio resid capi 2012
3 property at P10 Million. 6% of the Gross Selling Price (GSP). The tax base of the 6% capital gains tax
n ent tal
(CGT) is the higher between the GSP and the fair market value (FMV). The GSP
citiz gain
Should Mr. Castillo agree is P20 Million plus the CGT to be assumed by the buyer, following the doctrine
ens, s
to sell the land to Mr. of constructive receipt of income or a total of P21,276,595.74, which amount
and
Ayala in 2012 for P20 is higher than the FMV of P20 Million.
resid
Million, subject to the (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
ent
condition as stated in The
alien
Deed of Sale that the buyer
s
shall assume the capital
gains tax thereon, how
musch is the income tax
due on the transaction and
when must the tax return
be filed and the tax be paid
by the taxpayer? Explain
your answer. (5%)
 In May 2010, Mr. and Mrs.
Melencio Antonio donated
a house and lot with a fair
market value of P10 million
to their son, Roberto, who
is to be married during the
same year to Josefina
Angeles. Which statement
below is INCORRECT?
(A) There are four (4)
donations made - two (2)
donations are made by Mr.
Melencio Antonio to Exe
Roberto and Josefina, and mpti
two (2) donations are made ons
(D) Two (2) donations made by the spouses to Roberto are entitled to
by Mrs. Antonio;(B) The of
4 deduction from the gross gift as donation proper nuptias. According to Donor’s Dow
four (4) donations are made gifts 2012
4 by the Spouses Antonio to Section 101, NIRC; Tang Ho v. Court of Appeals(UP LAW COMPLEX & Tax ries
from
PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
members of the family, dono
hence, subject to the r's
graduated donor‟s tax rates tax
(2%-15%);
(C) Two (2) donations are
made by the spouses to
members of the family,
while two (2) other
donations are made to
strangers; (D) Two (2)
donations made by the
spouses to Roberto are
entitled to deduction from
the gross gift as donation
proper nuptias.
 On January 10, 2011, Maria
Reyes, single-mother,
donated cash in the amount
of P50,000.00 to her
daughter Cristina, and on
December 20, 2011, she
donated another
P50,000.00 to Cristina.
Which statement is
correct?
(A) Maria Reyes is subject Sch
(B) Maria Reyes is exempt from donor’s tax in 2011 because gross gift is
to donor‟s tax in 2011 Pers edul
P100,000.00;
4 because gross gift is Donor’s on e of
2012
5 P100,000.00; Tax liabl Tax
According to Section 99(A), NIRC
(B) Maria Reyes is exempt e Rate
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
from donor’s tax in 2011 s
because gross gift is
P100,000.00;
(C) Maria Reyes is exempt
from donor‟s tax in 2011
only to the extent of
P50,000.00;
(D) Maria Reyes is exempt
from donor‟s tax in 2011
because the donee is
minor.
 While he was traveling with
friends, Mr. Jose Francisco,
resident Filipino citizen,
died on January 20, 2011 in
a California Hospital, USA,
leaving personal and real
properties with market
values as follows: House
and Lot in Quezon City- P10
million; Cash in bank in
California - US$10,000.00; Wit
Citibank in New York - Com h
US$5,000.00; Cash in BPI posit resp
Makati - P4 million; Car in ion ect
4 Quezon City - P1 million; (B) 14 Million; According to Section 85, NIRC(UP LAW Estate of to
2012
6 Shares of stocks of Apple COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tax Gros resi
Corporation, US s den
corporation listed in NY Estat t
Stock Exchange - US e citiz
$5,000.00. Funeral en
expenses paid - P2 million.
Assume conversion rate of
US$1=Php50. His gross
estate for the Philippine
estate tax purposes shall
be: (A) 13
Million;
(B) 14 Million;
(C) 15 Million;
(D) 16 Million
 Jose Ramos, single, died of
a heart attack on October
10, 2011. leaving a
residential house and lot
with a market value of P1.8 Det
Dete
million and cash of ermi
rmin
P100,000.00. Funeral nati
ation
expenses paid amounted to on
of
P250,000.00. of
(A) His estate will be exempt from estate tax because the net estate is zero; Gros
(A) His estate will be Gro
4 Estate s
exempt from estate tax ss 2012
7 According to Section 85 & 86, NIRC Tax Estat
because the net estate is Esta
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) e
zero; te
and
(B) His estate will and
Net
(C) His estate will be subject Net
Estat
to estate tax because net Esta
e
estate is P1,700,000.00; te
(D) His estate will be
subject to estate tax
because net estate is
P800,000.00.
 While he was traveling with
friends, Mr. Jose Francisco,
resident Filipino citizen,
died on January 20, 2011 in
a California Hospital, USA,
leaving personal and real
properties with market
values as follows: House
and Lot in Quezon City- P10
million; Cash in bank in
California - US$10,000.00; Wit
Citibank in New York - Com h
US$5,000.00; Cash in BPI posit resp
Makati - P4 million; Car in ion ect
4 Quezon City - P1 million; (B) 14 Million; According to Section 85, NIRC(UP LAW Estate of to
2012
8 Shares of stocks of Apple COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tax Gros resi
Corporation, US s den
corporation listed in NY Estat t
Stock Exchange - US e citiz
$5,000.00. Funeral en
expenses paid - P2 million.
Assume conversion rate of
US$1=Php50. His gross
estate for the Philippine
estate tax purposes shall
be: (A) 13
Million;
(B) 14 Million;
(C) 15 Million;
(D) 16 Million
 Jose Ramos, single, died of
a heart attack on October
10, 2011. leaving a
residential house and lot
with a market value of P1.8 Det
Dete
million and cash of ermi
rmin
P100,000.00. Funeral nati
ation
expenses paid amounted to on
of
P250,000.00. of
(A) His estate will be exempt from estate tax because the net estate is zero; Gros
(A) His estate will be Gro
4 Estate s
exempt from estate tax ss 2012
9 According to Section 85 & 86, NIRC Tax Estat
because the net estate is Esta
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) e
zero; te
and
(B) His estate will and
Net
(C) His estate will be subject Net
Estat
to estate tax because net Esta
e
estate is P1,700,000.00; te
(D) His estate will be
subject to estate tax
because net estate is
P800,000.00.
 While he was traveling with
friends, Mr. Jose Francisco,
resident Filipino citizen,
died on January 20, 2011 in
a California Hospital, USA,
leaving personal and real
properties with market
values as follows: House
and Lot in Quezon City- P10
million; Cash in bank in
California - US$10,000.00; Wit
Citibank in New York - Com h
US$5,000.00; Cash in BPI posit resp
Makati - P4 million; Car in ion ect
5 Quezon City - P1 million; (B) 14 Million; According to Section 85, NIRC(UP LAW Estate of to
2012
0 Shares of stocks of Apple COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tax Gros resi
Corporation, US s den
corporation listed in NY Estat t
Stock Exchange - US e citiz
$5,000.00. Funeral en
expenses paid - P2 million.
Assume conversion rate of
US$1=Php50. His gross
estate for the Philippine
estate tax purposes shall
be: (A) 13
Million;
(B) 14 Million;
(C) 15 Million;
(D) 16 Million
 Jose Ramos, single, died of
a heart attack on October
10, 2011. leaving a
residential house and lot
with a market value of P1.8 Det
Dete
million and cash of ermi
rmin
P100,000.00. Funeral nati
ation
expenses paid amounted to on
of
P250,000.00. of
(A) His estate will be exempt from estate tax because the net estate is zero; Gros
(A) His estate will be Gro
5 Estate s
exempt from estate tax ss 2012
1 According to Section 85 & 86, NIRC Tax Estat
because the net estate is Esta
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) e
zero; te
and
(B) His estate will and
Net
(C) His estate will be subject Net
Estat
to estate tax because net Esta
e
estate is P1,700,000.00; te
(D) His estate will be
subject to estate tax
because net estate is
P800,000.00.
 While he was traveling with
friends, Mr. Jose Francisco,
resident Filipino citizen,
died on January 20, 2011 in
a California Hospital, USA,
leaving personal and real
properties with market
values as follows: House
and Lot in Quezon City- P10
million; Cash in bank in
California - US$10,000.00; Wit
Citibank in New York - Com h
US$5,000.00; Cash in BPI posit resp
Makati - P4 million; Car in ion ect
5 Quezon City - P1 million; (B) 14 Million; According to Section 85, NIRC(UP LAW Estate of to
2012
2 Shares of stocks of Apple COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tax Gros resi
Corporation, US s den
corporation listed in NY Estat t
Stock Exchange - US e citiz
$5,000.00. Funeral en
expenses paid - P2 million.
Assume conversion rate of
US$1=Php50. His gross
estate for the Philippine
estate tax purposes shall
be: (A) 13
Million;
(B) 14 Million;
(C) 15 Million;
(D) 16 Million
 Jose Ramos, single, died of
a heart attack on October
10, 2011. leaving a
residential house and lot
with a market value of P1.8 Det
Dete
million and cash of ermi
rmin
P100,000.00. Funeral nati
ation
expenses paid amounted to on
of
P250,000.00. of
(A) His estate will be exempt from estate tax because the net estate is zero; Gros
(A) His estate will be Gro
5 Estate s
exempt from estate tax ss 2012
3 According to Section 85 & 86, NIRC Tax Estat
because the net estate is Esta
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) e
zero; te
and
(B) His estate will and
Net
(C) His estate will be subject Net
Estat
to estate tax because net Esta
e
estate is P1,700,000.00; te
(D) His estate will be
subject to estate tax
because net estate is
P800,000.00.
The Commissioner of
Internal Revenue may NOT
inquire into the bank Com
deposits of a taxpayer, pro
(C) When the taxpayer offers to compromise the assessed tax based on
except: mise
financial incapacity to pay and he authorizes the Commissioner in writing to Com
(A) When the taxpayer files TAX and
5 look into his bank records; pro
a fraudulent return; REMEDI Abat 2012
4 mis
(B) When the taxpayer ES eme
According to Section 6(F), NIRC e
offers to compromise the nt of
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
assessed tax based on Taxe
erroneous assessment; s
(C) When the taxpayer
offers to compromise the
 assessed tax based on
financial incapacity to pay
and he authorizes the
Commissioner in writing to
look into his bank records;
(D) When the taxpayer did
not file his income tax
return for the year.

The Commissioner of
Internal Revenue issued a
BIR ruling to the effect that
the transaction is liable to
income tax and value added
tax. Upon receipt of the
ruling, a taxpayer does not
agree thereto. What is his
proper remedy?
Taxp
(A) File a petition for review
ayer'
with the Court of Tax (C) File an appeal to the Secretary of Finance within thirty(30) days from TAX Asse
5 s
Appeals within thirty(30) receipt thereof; According to Section 4, NIRC(UP LAW REMEDI ssm 2012
5 days from receipt thereof; rem
COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ES ent
edie
(B) File a motion for
s
reconsideration with the
Commissioner of Internal
Revenue;
(C) File an appeal to the
Secretary of Finance within
thirty(30) days from receipt
thereof;
(D) File an appeal to the
Secretary of Justice within
 thirty(30) days from receipt
thereof.

On April 15, 2011, the

Commissioner of Internal
Revenue mailed by
registered mail the final
assessment notice and the
demand letter covering the
calendar year 2007 with the
QC Post Office. Which
Taxp
statement is correct? (D) The assessment notice is valid even if the taxpayer received, the same
ayer'
(A) The assessment notice after the three-year period from the date of filing of the tax return. TAX Asse
5 s
is void because it was REMEDI ssm 2012
6 rem
mailed beyond the According to Section 203, NIRC; BPI v. CIR, G.R. No. 139736, October 17, 2005 ES ent
edie
prescriptive period; (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
s
(B) The assessment notice is
void because it was not
received by the taxpayer
within the three-year
period from the date of
filing of the tax return;
(C) The assessment notice is
void if the taxpayer can
 show that the same was
received only after one(1)
month from date of
mailing;
(D) The assessment notice
is valid even if the taxpayer
received, the same after
the three-year period from
the date of filing of the tax
return.

A Preliminary Assessment
Notice (PAN) is NOT
required to be issued by the
BIR before issuing a Final
Assessment Notice (FAN) in
one of the following cases:
(A) When a taxpayer does
not pay the 2010 deficiency Taxp
income tax liability on or (B) When the finding for any deficiency tax is the result mathematical error in ayer'
TAX Asse
5 before July 15 of the year; the computation of the tax as appearing on the face of the return; s
REMEDI ssm 2012
7 (B) When the finding for According to Section 228, NIRC(UP LAW COMPLEX & PHILIPPINE ASSOCIATION
ES
rem
ent
any deficiency tax is the OF LAW SCHOOLS) edie
result mathematical error in s
the computation of the tax
as appearing on the face of
the return;
(C) When a discrepancy has
been determined between
the value added tax paid
and the amount due for the
 year; (D) When the
amount of discrepancy
shown in the Letter Notice
is not paid within thirty (30)
days from date of receipt.

When a protest against the

deficiency income tax
assessment was denied by
the BIR Regional Director of
Quezon City, the appeal to
the Court of Tax Appeals
must be filed by a taxpayer:
Juris Juris
(A) If the amount of basic
All the choices are correct. All the decisions on disputed assessments are dicti dicti
tax assessed is P100,000.00 Judicial
5 appealable to the CTA (in Division) irrespective of the amount (Section 3, RA on on
or more; Remedi 2012
8 (B) If the amount of basic 9282). of of
es
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) the the
tax assessed is P300,000.00
CTA CTA
or more;
(C) If the amount of basic
tax assessed is P500,000.00
or more;
(D) If the amount of basic
tax assessed is P1 Million or
more.
 The taxpayer received an
assessment notice on April
15, 2011 and filed its
request for reinvestigation
against the assessment on
April 30, 2011. Additional
documentary evidence in Taxp
support of its protest was (C) January 30, 2012; ayer'
TAX Asse
5 submitted by it on June 30, s
REMEDI ssm 2012
9 2011. If no denial of the According to Section 228, NIRC rem
ES ent
protest was received by the (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) edie
taxpayer, when is the last s
day for the filing of its
appeal to the CTA?
(A) November 30, 2011;
(B) December 30, 2011;
(C) January 30, 2012;
(D) February 28, 2012.
The taxpayer received an
assessment notice on April
15, 2011 and filed its
request for reinvestigation
against the assessment on
(A) August 30, 2011; According to Section 228, NIRC (nearest
April 30, 2011. Additional Taxp
answer but not a correct answer) [Note: The period to appeal is within 30 days
documentary evidence in ayer'
from receipt of the final decision by the Commissioner. The decision was TAX Asse
6 support of its protest was s
received on July 30, 2011 so the last day to perfect an appeal with the CTA is REMEDI ssm 2012
0 submitted by it on June 30, rem
August 29, 2011. It is thus clear that the question did not provide for the ES ent
2011. (Using the same facts edie
CORRECT answer. Hence, it should be treated as a bonus question.](UP LAW
in the immediately s
COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
preceding number, but)
assuming that the final
decision on the disputed
assessment was received by
the taxpayer on July 30,
 2011, when is the last day
for filing of the appeal to
the CTA. (A) August 30,
2011;
(B) September 30, 2011;
(C) December 30, 2011;
(D) January 30, 2012.

Which court has jurisdiction

to determine if the warrant
of distraint and levy issued
Juris Juris
by the BIR is valid and to
(C) Court of Tax Appeals; dicti dicti
rule if the waiver of the Judicial
6 on on
Statute of Limitations was Remedi 2012
1 According to Section 7, RA 9282 of of
validly effected? es
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) the the
(A) City Courts;
CTA CTA
(B) Regional Trial Courts;
(C) Court of Tax Appeals;
(D) Court of Appeals.
Which statement below on
compromise of tax liability Com
is correct? pro
(A) Compromise of a tax (C) Compromise of a tax liability is available even during appeal, provided that mise
Com
liability is available only at prior leave of court is obtained; TAX and
6 pro
the administrative level; REMEDI Abat 2012
2 mis
(B) Compromise of a tax According to RR 30-2002 ES eme
e
liability is available only (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) nt of
before trial at the CTA; Taxe
(C) Compromise of a tax s
liability is available even
 during appeal, provided
that prior leave of court is
obtained;
(D) Compromise of a tax
liability is still available
even after the court
decision has become final
and executory.

The submission of the

required documents within
sixty (60) days from the
filing of the protest is
available only where:
(A) The taxpayer previously
filed a Motion for
Reconsideration with the Taxp
BIR official; ayer'
(C) The taxpayer previously filed a request for reinvestigation with the BIR TAX Asse
6 (B) The taxpayer previously s
official; According to Section 228, NIRC; RCBC v. CIR(UP REMEDI ssm 2012
3 filed a request for rem
LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ES ent
reconsideration with the edie
BIR official; s
(C) The taxpayer previously
filed a request for
reinvestigation with the BIR
official;
(D) The taxpayer previously
filed an extension to file a
protest with the BIR official.
 The prescriptive period for
the collection of the
deficiency tax assessment
will be tolled:
(A) If the taxpayer files a
request for reconsideration
with the Asst.
Commissioner;
(B) If the taxpayer files a request for reinvestigation that is approved by the Taxp
(B) If the taxpayer files a
Commissioner of Internal Revenue; ayer'
request for reinvestigation TAX Coll
6 s
that is approved by the REMEDI ecti 2012
4 According to Section 223, NIRC; BPI v. Commissioner, G.R. No. 139736, rem
Commissioner of Internal ES on
October 17, 2005 edie
Revenue;
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) s
(C) If the taxpayer changes
his address in the
Philippines that is
communicated to the BIR
official;
(D) If a warrant of levy is
served upon the taxpayer‟s
real property in Manila
Which statement is
correct? The collection of a
deficiency tax assessment
by distraint and levy: Ad
Gove
(A) May be repeated, if (A) May be repeated, if necessary, until the full amount due, including all mini
rnm
necessary, until the full expenses, is collected; TAX stra
6 ent
amount due, including all REMEDI tive 2012
5 Rem
expenses, is collected; According to Section 217, NIRC ES rem
edie
(B) Must be done (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) edie
s
successively, first by s
distraint and then by levy;
(C) Automatically covers the
bank deposits of a
 delinquent taxpayer;
(D) May be done only once
during the taxable year.

The prescriptive period to

file a criminal action is:
(A) Ten (10) years from the
date of discovery of the
commission of fraud or
non-filing of tax return;
(B) Five (5) years from the
date of issuance of the final
assessment notice; (D) Five (5) years from the commission of the violation of the law, and if the Judic Judi
(C) Three (3) years from the same be not known at the time, from the discovery thereof and the institution Judicial ial cial
6
filing of the annual tax of judicial proceedings for its investigation and punishment. Remedi proc proc 2012
6
return; (D) Five (5) years According to Section 281, NIRC(UP LAW COMPLEX & PHILIPPINE ASSOCIATION es edur edu
from the commission of the OF LAW SCHOOLS) es res
violation of the law, and if
the same be not known at
the time, from the
discovery thereof and the
institution of judicial
proceedings for its
investigation and
punishment.
 The accused‟s mere
reliance on the
representations made by
his accountant, with
deliberate refusal or (C) Wilful blindness; Judic Judi
avoidance to verify the Judicial ial cial
6
contents of his tax return According to CTA E.B. Criminal Case No. 006; People v. Kintanar, G.R. No. Remedi proc proc 2012
7 and to inquire on its 196340 es edur edu
authenticity constitutes: (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) es res
(A) Simple negligence;
(B) Gross negligence;
(C) Wilful blindness;
(D) Excusable negligence.
The acquittal of the accused
in the criminal action for
the failure to file income
tax return and failure to
supply correct information
will have the following
consequence:
(C) The CTA will impose civil or tax liability only if there was a final assessment
(A) The CTA will
notice issued by the BIR against the accused in accordance with the prescribed
automatically exempt the Judic Judi
procedures for issuing assessments, which was presented during the trial; or
accused from any civil Judicial ial cial
6 (D) The CTA will impose civil or tax liability, provided that a computation of the
liability; Remedi proc proc 2012
8 tax liability is presented during the trial.
(B) The CTA will still hold es edur edu
According to Republic vs. Patanao, L-22356, July 1, 1967; (Castro v. Collector
the taxpayer liable for es res
of Internal Revenue, L-12174, April 26, 1962).
deficiency income tax
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
liability in all cases, since
preponderance of evidence
is merely required for tax
cases;
(C) The CTA will impose civil
or tax liability only if there
was a final assessment
 notice issued by the BIR
against the accused in
accordance with the
prescribed procedures for
issuing assessments, which
was presented during the
trial;
(D) The CTA will impose civil
or tax liability, provided
that a computation of the
tax liability is presented
during the trial.

Which cases are appealable

to the CTA? (A)
Decisions of the Secretary
of Finance in cases
involving liability for
customs duties, seizure,
detention or release of
Juris Juris
property affected;
(B) Decisions of the Commissioner of Customs in cases involving liability for dicti dicti
(B) Decisions of the Judicial
6 customs duties, seizure, detention or release of property affected; According on on
Commissioner of Customs Remedi 2012
9 in cases involving liability to Section 7, RA 9282.(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW of of
es
SCHOOLS) the the
for customs duties, seizure,
CTA CTA
detention or release of
property affected;
(C) Decisions of the
Collector of Customs in
cases involving liability for
customs duties, seizure,
detention or release of
 property affected;
(D) Decisions of the BIR
Commissioner in cases
involving liability for
customs duties, seizure,
detention or release of
property affected.

The BIR issude in 2010 a

final assessment notice and
demand letter against X
Corporation covering
deficiency income tas for
the year 2008 in the
amount of P10 Million. X
Corporation earlier Request for Reconsideration – plea for evaluation of assessment on the basis
Taxp
requested the advice of a of existing records without need of presentation of additional evidence. It
ayer'
lawyer on whether or not it does not suspend the period to collect the deficiency tax. Request for TAX Asse
7 s
should file a request for Reinvestigation – plea for re-evaluation on the basis of newly discovered REMEDI ssm 2012
0 rem
reconsideration or a evidence which are to be introduced for examination for the first time. It ES ent
edie
request for reinvestigation. suspends the prescriptive period to collect.
s
The lawyer said it does not (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
matter wheteher the
protest files against the
assessment is a request for
reconsideration or a
request for reinvestigation,
because it has same
consequences or
 implications.

What are the differences

between a request for
reconsideration and a
request for
reinvestigation? (5%)

The BIR issude in 2010 a

final assessment notice and
demand letter against X
Corporation covering
deficiency income tas for
the year 2008 in the
amount of P10 Million. X
Corporation earlier
requested the advice of a Taxp
lawyer on whether or not it ayer'
No, in view of the aforesaid difference between Request for Reconsideration TAX Asse
7 should file a request for s
& Request for Reinvestigation. REMEDI ssm 2012
1 reconsideration or a rem
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ES ent
request for reinvestigation. edie
The lawyer said it does not s
matter wheteher the
protest files against the
assessment is a request for
reconsideration or a
request for reinvestigation,
because it has same
consequences or
implications.
 Do you agree with the
advice of the lawyer?
Explain your answer (5%)

May the bank deposits – No. As a general rule, bank deposits of an individual taxpayer may not be
peso and foreign currency disclosed by a commercial bank to the Commissioner. As exceptions, the
of the an individual Commissioner is authorized to inquire into the bank deposits of: (1) a
taxpayer be disclosed by a decedent to determine his gross estate; and (2) any taxpayer who has filed an Ad
Gove
commercial bank to the application for compromise of his tax liability by reason of financial incapacity mini
rnm
Commissioner of Internal to pay his tax liability. In case a taxpayer files an application to compromise TAX stra
7 ent
Revenue, in connection the payment of his tax liabilities on his claim that his financial position REMEDI tive 2012
2 Rem
with a tax investigation demonstrates a clear inability to pay the tax assessed, his application shall not ES rem
edie
being conducted by be considered unless and until he waives in writing his privilege under edie
s
revenue officials, without Republic Act No. 1405 (Bank Secrecy Law) or under other general or special s
violating the relevant bank laws, and such waiver shall constitute the authority of the Commissioner to
secrecy laws? Explain your inquire into the bank deposits of the taxpayer (Section 6, NIRC).(UP LAW
answer. (5%) COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
In 2011, the Commissioner
of the U.S. Internal Revenue Yes. The Commissioner should agree to the request pursuant to the principle
Ad
Service (IRS) requested in of international comity. The Commissioner of Internal Revenue has the Gove
mini
writing the Commissioner authority to inquire into bank deposit accounts and related information held rnm
TAX stra
7 of Internal Reveneu to get by financial institutions of a specific taxpayer subject of a request for the ent
REMEDI tive 2012
3 the informatrion from a supply of tax information from a foreign tax authority pursuant to an Rem
ES rem
bank in the Philippines, international convention or agreement to which the Philippines is a signatory edie
edie
regarding the deposits of a or party of (Section 3, RA 10021). s
s
U.S. Citizen residing in the (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
Philippines, who is under
 examiniation by the officials
of the US IRS, pursuant to
the US-Philippine Tax
Treaty and othert existing
laws. Should the BIR
Commissioner agree to
obtain such informarion
from the bank and provide
the same to the IRS?
Explain your answer. (5%)
Is the bank secrecy law in
the Philippines violated
when the BIR issues a
Warrant of Garnishment
directed against a domestic No. Garnishment is an administrative remedy allowed by law to enforce a tax Ad
Gove
bank, requiring it not to liability. Bank accounts shall be garnished by serving a warrant of garnishment mini
rnm
allow any withdrawal from upon the taxpayer and upon the president, manager, treasurer or other TAX stra
7 ent
any existing bank deposit of responsible officer of the bank. Upon receipt of the warrant of garnishment, REMEDI tive 2012
4 he delinquent taxpayer Rem
the bank shall turn over to the Commissioner so much of the bank accounts as ES rem
edie
mentioned in the Warrant may be sufficient to satisfy the claim of the Government (Section 208, NIRC). edie
s
and to freeze the same until (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) s
the tax delinquency of said
taxpayer is settled with the
BIR? Explain your answer.
(5%)
 In the examination
conducted by the revenue
officials against the
corporate taxpayer in 2010,
the BIR issued a final
assessment notice and
demand letter which states:
"It is requested that the
above deficiency tax be NO. The Petition for Review should not be denied. The case is an exception to
paid immediately upon the rule on exhaustion of administrative remedies. The BIR is estopped from
receipt hereof, inclusive of claiming that the filing of the Petition for Review is premature because the
penalties incident to taxpayer failed to exhaust all administrative remedies. The statement of the
delinquency. This is our BIR in its Final Assessment Notice and Demand Letter led the taxpayer to
final decision based on conclude that only a final judicial ruling in his favor would be accepted by the
investigation. If you BIR. The taxpayer cannot be blamed for not filing a protest against the Formal Taxp
disagree, you may appeal Letter of Demand with Assessment Notices since the language used and the ayer'
TAX Asse
7 this final decision within tenor of the demand letter indicate that it is the final decision of the s
REMEDI ssm 2012
5 thirty (30) days from receipt respondent on the matter. The CIR should indicate, in a clear and unequivocal
ES
rem
ent
hereof, otherwise said language, whether his action on a disputed assessment constitutes his final edie
deficiency tax assessment determination thereon in order for the taxpayer concerned to determine s
shall become final, when his or her right to appeal to the tax court accrues. Although there was
executory and no direct reference for the taxpayer to bring the matter directly to the CTA, it
demandable." The cannot be denied that the word “appeal” under prevailing tax laws refers to
assessment was the filing of a Petition for Review with the CTA (Allied Bank vs. CIR, G.R. No.
immediately appealed by 175097, February 5, 2010).(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF
the taxpayer to the Court of LAW SCHOOLS)
Tax Appeals, without filing
its protest against the
assessment and without a
denial thereof by the BIR. If
you were the judge, would
your deny the petition for
review filed by the taxpayer
and consider the case as
 prematurely filed? Explain
your answer (5%)

Explain the following In taxation, the taxpayer becomes criminally liable because of a civil liability.
statements: While he may be acquitted on the criminal case, his acquittal could not
operate to discharge him from the duty to pay tax, since that duty is imposed
Judic Judi
The acquittal of the by statute prior to and independent of any attempt on the taxpayer to evade
Judicial ial cial
7 taxpayer in a criminal payment. The obligation to pay the tax is not a mere consequence of the
Remedi proc proc 2012
6 action under the Tax Code felonious acts charged in the information, nor is a mere civil liability derived
es edur edu
does not necessarily result from crime that would be wiped out by the declaration that the criminal acts
es res
in a exeoneration of said charged did not exist (Castro v. Collector of Internal Revenue, L-12174, April
taxpayer from his civil 26, 1962).
liability to pay taxes. (3%) (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
 Explain the following
statements:

Should the accused be Yes. If the failure to file tax return or to supply correct information resulted to
Stat
found guilty beyond unpaid taxes the amount of which is proven during trial, the CTA shall not only
utor
reasonable doubt for impose the criminal penalty but must likewise order the payment of the civil
y Civil
violation of Section 255 of liability (Section 205(b), NIRC). As a matter of fact, it is well-recognized that in TAX
7 offe Pen
the Tax Code for failure to the case of failure to file a return, a proceeding in court for the collection of REMEDI 2012
7 nses altie
file tax return or to to the tax may be filed without the need of an assessment, which recognizes that ES
and s
spply correct information), the civil liability of a taxpayer maybe established without the need of an
pena
the imposition of the civil assessment (Section 222(a), NIRC).
lties
liability by the CTA should (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
be automatic and no
assessment notice from
the BIR is necessary? (2%)
Which statement is
WRONG?
(A) The power of taxation
may be exercised by the
government, its political Scop Inhe
subdivisions, and public e rent
General
utilities; (A) The power of taxation may be exercised by the government, its political and Limi
Principl
7 (B) Generally, there is no subdivisions, and public utilities; According to Inherent Limit tati
es of 2012
8 limit on the amount of tax Powers of the State(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW ation ons
Taxatio
that may be imposed; SCHOOLS) of of
n
(C) The money contributed Taxa Taxa
as tax becomes part of the tion tion
public funds;
(D) The power of tax is
subject to certain
constitutional limitations.
 Which statement below
expresses the lifeblood
theory?
(A) The assessed taxes must
be enforced by the
(B) The underlying basis of taxation is government necessity, for without
government.
taxation, a government can neither exist nor endure;
(B) The underlying basis of
taxation is government
Explanation: Taxes are the lifeblood of the government, for without taxes, the Theo
necessity, for without
government can neither exist nor endure. A principal attribute of sovereignty, General ry Life
taxation, a government can
the exercise of taxing power derives its source from the very existence of the Principl and bloo
7 neither exist nor endure;
state whose social contract with its citizens obliges it to promote public es of Basis d 2012
9 (C) Taxation is an arbitrary interest and common good. The theory behind the exercise of the power to Taxatio of the
method of exaction by
tax emanates from necessity; without taxes, government cannot fulfil its n Taxa ory
those who are in the seat of
mandate of promoting the general welfare and well-being of the people. tion
power;
(National Power Corporation vs. City of Cabanatuan, G.R. No. 149110 April 9,
(D) The power of taxation is
2003).
an inherent power of the
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
sovereign to impose
burdens upon subjects and
objects “within its
jurisdiction for the purpose
of raising revenues”.
 Bank A deposited money
with Bank B which earns
interest that is subjected to
the 20% final withholding
tax. At the same time, Bank
A is subjected to the 5%
gross receipts tax on its
interest income on loan
transactions to customers. (A) There is double taxation because two taxes - income tax and gross receipts
Which statement below tax are imposed on the interest incomes described above, and double taxation
INCORRECTLY describes the is prohibited under the 1987 Constitution. Explanation: There is no double
transaction?(A) There is taxation if the law imposes two different taxes on the same income, business
double taxation because or property. First, the taxes herein are imposed on two different subject
two taxes - income tax and matters. The subject matter of the FWT [Final Withholding Tax] is the passive
gross receipts tax are income generated in the form of interest on deposits and yield on deposit
General Doct
imposed on the interest substitutes, while the subject matter of the GRT [Gross Receipts Tax] is the Dou
Principl rines
8 incomes described above, privilege of engaging in the business of banking. Second, although both taxes ble
es of in 2012
0 and double taxation is are national in scope because they are imposed by the same taxing authority -
Taxatio Taxa
taxa
prohibited under the 1987 the national government under the Tax Code - and operate within the same tion
n tion
Constitution. (B) There is Philippine jurisdiction for the same purpose of raising revenues, the taxing
no double taxation because periods they affect are different. The FWT is deducted and withheld as soon as
the first tax is income tax, the income is earned, and is paid after every calendar quarter in which it is
while the second tax is earned. On the other hand, the GRT is neither deducted nor withheld, but is
business tax;(C) There is no paid only after every taxable quarter in which it is earned. (Commissioner of
double taxation because Internal Revenue vs. BPI, G.R. No. 147375 dated June 26, 2006)(UP LAW
the income tax is on the COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
interest income of Bank A
on its deposits with Bank B
(passive income), while the
gross receipts tax is on the
interest Income received by
Bank A from loans to its
debtor-customers (active
income); (D) Income tax
 on interest income of
deposits of Bank A is a
direct tax, while GRT on
interest income on loan
transaction is an indirect
tax.

Which of the following

statements is NOT correct?
(A) In case of doubt,
statutes levying taxes are
(D) A memorandum circular promulgated by the CIR that imposes penalty for
construed strictly against
violations of certain rules needed not be published in a newspaper of general Taxp
the government;
circulation or official gazette because it has the force and effect of law. ayer'
(B) The construction of a TAX Asse
8 s
statute made by his REMEDI ssm 2012
1 predecessors is not binding Explanation: A revenue memorandum circular shall not begin to be operative rem
ES ent
until after due notice thereof may be fairly presumed (Commissioner of edie
upon the successor, if
Internal Revenue vs. Philippine Airlines, G.R. No. 180066 dated July 8, 2009). s
thereafter he becomes
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
satisfied that a different
construction should be
given;
(C) The reversal of a ruling
 shall not generally be given
retroactive application, if
said reversal will be
prejudicial to the taxpayer;
(D) A memorandum circular
promulgated by the CIR
that imposes penalty for
violations of certain rules
needed not be published in
a newspaper of general
circulation or official
gazette because it has the
force and effect of law.
The Philippines adopted the
semi-global tax system,
which means that:
(A) All taxable incomes,
regardless of the nature of
income, are added together
to arrive at gross income,
and all allowable taxable
Sch
income; (B) All incomes subject to final withholding taxes are liable to income tax Inco
edul
(B) All incomes subject to under the schedular tax system, while all ordinary income as well as income Income me
8 ar
final withholding taxes are not subject to final withholding taxes are liable to income tax under’ the, Taxatio tax 2012
2 tax
liable to income tax under global tax system; According to General Principles of Taxation(UP LAW n syste
syst
the schedular tax system, COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) m
em
while all ordinary income as
well as income not subject
to final withholding taxes
are liable to income tax
under’ the, global tax
system; (C) All
taxable incomes are subject
to final withholding taxes
 under the schedular tax
system;
(D) All taxable incomes
from sources within and
without the Philippines are
liable to income tax.

Mr. Z made an importation

which he declared at the
Bureau of Customs (BOC) as
"Used Truck Replacement
Parts". Upon investigation,
Impo
the container vans
rtati
contained 15 units of
on in
Porsche and Ferrari cars.
viola
Characterize Mr. Z's action. (A) Mr. Z committed smuggling.
Tariff tion
(1%) Smu
and of
1 (A) Mr. Z committed According to Section 3601, TCCP; Rieta v. People of the Philippines, 436 SCRA ggli 2013
Custom tax
smuggling. 273 ng
s credi
(B) Mr. Z did not commit (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
t
smuggling because he
certi
submitted his shipment to
ficat
BOC examination.
e
(C) Mr. Z only made a
misdeclaration, but did not
commit smuggling.
(D) Mr. Z did not commit
smuggling because the
 shipment has not left the
customs area.

On October 15, 2005, ABC

Corp. imported 1,000 kilos
No. The Bureau of Customs (BOC) has lost its right to assess deficiency
of steel ingots and paid
customs duties and VAT. The imported steel ingots in 2005 have been entered
customs duties and VAT to
and the customs duties thereon had been paid by thereby making the
the Bureau of Customs on
liquidation of the importation final and conclusive upon all parties after the
the importation. On
expiration of three (3) years from the date of final payment of duties and
February 17, 2009, the Tariff
taxes (Sec 1603, TCC, as amended by RA 9135). [Note: Insofar as VAT on Rem Tax
Bureau of Customs, citing and
2 importation is concerned, the underpayment will be automatically cured edie pay 2013
provisions of the Tariff and Custom
when these are credited against the output tax due upon sale by the imported s er
Customs Code on post- s
when the VAT return is filed. Be that as it may, an assessment for deficiency
audit, investigated and
VAT can only be made by the BIR (not by BOC), VAT being an internal revenue
assessed ABC Corp. for
tax, within three (3) years from the last day prescribed by law for filing of the
deficiency customs duties
VAT return. (Sec 203, NIRC)].
and VAT.
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
Is the Bureau of Customs
correct? (7%)
 Pheleco is a power
generation and distribution
company operating mainly
from the City of Taguig. It
owns electric poles which it
also rents out to other
companies that use poles
such as telephone and
cable companies. Taguig
passed an ordinance
imposing a fee equivalent pow
to 1% of the annual rental er
for these poles. Pheleco to
questioned 'the legality of crea
the ordinance on the te
Local Local
ground that it imposes an reve
(B) The ordinance is valid as a legitimate exercise of police power to regulate Govern Taxi
income tax which local nue
3 electric poles. According to Section 129, RA 7160(UP LAW COMPLEX ment ng 2013
government units (LGUs) s
& PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio auth
are prohibited from exer
n ority
imposing. Rule on the cise
validity of the ordinance. thro
(1%) ugh
(A) The ordinance is void; LGU
the fee is based on rental s
income and is therefore a
tax on income.
(B) The ordinance is valid as
a legitimate exercise of
police power to regulate
electric poles.
(C) The ordinance is void;
1% of annual rental is
excessive and oppressive.
(D) The ordinance is valid;
 an LGU may impose a tax
on income.

ABC Corporation is
registered as a holding
company and has an office
in the City of Makati. It has
no actual business No. the corporation cannot be considered as a contractor because it does not
operations. It invested in render services for others for a fee. A contractor is one whose activity consists
Do
another company and its essentially in the sale of all kinds of services for a fee, regardless of whether or
Kind mes
earnings are limited to not the performance of the service calls for the exercise or use of the physical
Income s of tic
dividends from this or mental faculties of such contractor or its employees. To be considered as a
4 Taxatio taxp Cor 2013
investment, interests on its contractor, the corporation must derive income from doing active business of
n ayer pora
bank deposits, and foreign selling services and not from deriving purely passive income. Accordingly, a
s tion
exchange gains from its mere holding company cannot be assessed by the City of Makati as a
s
foreign currency account. contractor (Sec 131 (h), LGC).
The City of Makati assessed (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
ABC Corporation as a
contractor or one that sells
services for a fee. Is the City
of Makati correct? (6%)
 Atty. Gambino is a partner
in a general professional
partnership. The
partnership computes its
gross revenues, claims
deductions allowed under
No. The BIR is wrong in disallowing the deductions claimed by Atty. Gambino.
the Tax Code, and
It appears that the general professional partnership (GPP) claimed itemized Excl
distributes the net income
deductions from its gross revenues in arriving at its distributable net income. usio
to the partners, including
The share of a partner in the net income of the GPP must be reported by him ns
Atty. Gambino, in
as part of his gross income from practice of profession and he is allowed to Income Inco fro
accordance with its articles
5 claim further deductions which are reasonable, ordinary and necessary in the Taxatio me m 2013
of partnership.
practice of profession and were not claimed by the partnership in computing n Tax Gro
In filing his own income tax
its net income (Sec 26, NIRC; RR No. 16-2008; 2-2010). ss
return, Atty. Gambino
Consequently, these partners may claim deductions under Section 34 of the Inco
claimed deductions that the
NIRC from their gross inome. me
partnership did not claim,
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
such as purchase of law
books, entertainment
expenses, car insurance and
car depreciation. The BIR
disallowed the deductions.
Was the BIR correct? (6%)
 In 2000, Mr. Belen bought a
residential house and lot
Taxa
for P1,000,000. He used the
Since the planned sale involves a real property classified as a capital asset, the tion
property as his and his
material considerations to take into account to compute the income tax are: of
family's principal residence.
1. The current fair market value of the property to be sold. The current fair resi
It is now year 2013 and he
market value is the higher between the zonal value and the fair market value den
is thinking of selling the
per tax declaration. 2. The gross selling price of the property. 3. Determination t
property to buy a new one.
of the tax base which is the higher between the gross selling price and the citiz
He seeks your advice on
current fair market of the property. The income tax is computed as 6% of the ens,
how much income tax he
tax base which is in the nature of a final capital gains tax. (Sec 24 (D)(1), NIRC). non
would pay if he sells the
However, since the property to be sold is a principal residence and the Income Inco -
property. The total zonal
6 purpose is to buy a new one, I will advise Mr. Belen that the sale can be Taxatio me resi 2013
value of the property
exempt from 6% capital gains tax if he is willing to comply with the following n Tax den
is P5,000,000 and the fair
conditions: a. He must utilize the proceeds of sale acquiring a new principal t
market value per the tax
residence within 18 months from the date of disposition; b. He should notify citiz
declaration is P2,500,000.
the Commissioner of his intention to avail of the exemption within 30 days ens,
He intends to sell it
from date of sale; c. He should open an escrow account with a bank and and
forP6,000,000. What
deposit the 6% capital gains tax due on the sale. If he complies with the resi
material considerations will
utilization requirement he will be entitled to get back his deposit; otherwise, den
you take into account in
the deposit will be applied against the capital gains tax due. (Sec 24 (D)(2), t
computing the income tax?
NIRC)(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) alie
Please explain the legal
ns
relevance of each of these
considerations. (7%)
ABC Corp. was dissolved
Sour
and liquidating dividends
ces
were declared and paid to
(B) The stockholders should declare their gain from their investment and pay of
the stockholders. What tax Gros
income tax at the ordinary rates. Income Inco
consequence follows? (1%) s
7 Taxatio me 2013
(A) ABC Corp. should Inco
According to Section 39, BIR Ruling 39-02, Nov. 11, 2002 n Subj
deduct a final tax of 10% me
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ect
from the dividends.
to
(B) The stockholders should
tax
declare their gain from
 their investment and pay
income tax at the ordinary
rates.
(C) The dividends are
exempt from tax.
(D) ABC Corp. should
withhold a 10% creditable
tax.
MGC Corp. secured an
income tax holiday for 5
years as a pioneer industry.
On the fourth year of the
tax holiday, MGC Corp.
declared and paid cash
dividends to its
stockholders, all of whom
are individuals. Are the Sour
dividends taxable? (1%) ces
(A) The dividends are of
(A) The dividends are taxable; the tax exemption of MGC Corp. does not Gros
taxable; the tax exemption Income inco
extend to its stockholders. According to Sunio v. NLRC, G.R. No. s
8 of MGC Corp. does not Taxatio me 2013
57767, Jan. 31, 1984(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW Inco
extend to its stockholders. n subj
SCHOOLS) me
(B) The dividends are tax ect
exempt because of MGC to
Corp.'s income tax holiday. tax
(C) The dividends are
taxable if they exceed 50%
of MGC Corp.'s retained
earnings.
(D) The dividends are
exempt if paid before the
end of MGC Corp.'s fiscal
year.
 In 2010, Mr. Platon sent his
sister Helen $1 ,000 via a
telegraphic transfer
through the Bank of PI. The
bank's remittance clerk
made a mistake and
credited Helen with
$1,000,000 which she
promptly withdrew. The
bank demanded the return
of the mistakenly credited
excess, but Helen refused. Sour
The BIR entered the picture ces
and investigated Helen. of
(B) Yes, income is income regardless of the source. Gros
Would the BIR be correct if Income inco
s
9 it determines that Helen Taxatio me 2013
According to Javier v. Commissioner, 199 SCRA 824, G.R. No. 78953 Inco
earned taxable income n subj
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) me
under these facts? (1%) ect
(A) No, she had no income to
because she had no right to tax
the mistakenly credited
funds.
(B) Yes, income is income
regardless of the source.
(C) No, it was not her fault
that the funds in excess of
$1,000 were credited to
her.
(D) No, the funds in excess
of$1,000 were in effect
donated to her.
 PRT Corp. purchased a
residential house and lot
with a swimming pool in an
upscale subdivision and
required the company
president to stay there
without paying rent; it
reasoned out that the
company president must
maintain a certain image
and be able to entertain
guests at the house to
(B) There was a taxable fringe benefit since the stay at the house was for free
promote the company's
First, the company president is not a rank-and-file employee. Thus, the Sour
business. The company
housing benefit is subject to fringe benefit tax in pursuant to Section 33 of the ces
president declared that
NIRC and Section 2.33(A) of the RR No. 03-98. Although the housing benefit to of
because they are childless, Gros
the President may be for the convenience of the employer (PRT Corp.) or Income inco
1 he and his wife could very s
necessary to its business. still. it also inured to the benefot of the President as Taxatio me 2013
0 well live in a smaller house. his stay thereis is for free. RR No.03-98 also provides for the guidelines and n
Inco
subj
Was there a taxable fringe me
valuation of fringe benefits for purposes of computing the portion which shall ect
benefit? (1%) (A) There
be subject to fringe benefits tax in cases where the fringe benefits entail joint to
was no taxable fringe
benefits to the employer and employee. Thus, there was a taxable fringe tax
benefit since it was for the
benefit.(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
convenience of the
employer and was
necessary for its business.
(B) There was a taxable
fringe benefit since the stay
at the house was for free.
(C) There was a taxable
fringe benefit because the
house was very luxurious.
(D) There was no taxable
fringe benefit because the
company president was
 only required to stay there
and did not demand free
housing.

Aleta sued Boboy for

breach of promise to marry.
Boboy lost the case and
duly paid the court's award
that included, among
others, Pl00,000 as moral
damages for the mental
anguish Aleta suffered. Did (D) She had no taxable income since moral damages are compensatory.
Income Inco
1 Aleta earn a taxable Inco
Taxatio me 2013
1 income? (1%) According to Section 32 (B)(4), NIRC me
n Tax
(A) She had a taxable (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
income of P100,000 since
income is income from
whatever source.
(B) She had no taxable
income because it was a
donation. (C)
She had taxable income
 since she made a profit.
(D) She had no taxable
income since moral
damages are
compensatory.

Mr. A was preparing his

income tax return and had
some doubt on whether a
commission he earned
should be declared for the
current year or for the
succeeding year. He sought
the opinion of his lawyer
Sour
who advised him to report
ces
the commission in the
(A) Mr. A is not guilty of fraud as he simply followed the advice of his lawyer. of
succeeding year. He heeded Gros
He only relied in good faith on the expertise of his lawyer in not declaring his Income inco
1 his lawyer's advice and s
income for that year. According to CIR v. CA, G.R. Taxatio me 2013
2 reported the commission in No. 119322, June 4, 1996(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF n
Inco
subj
the succeeding year. The me
LAW SCHOOLS) ect
lawyer's advice turned out
to
to be wrong; in Mr. A's
tax
petition against the BIR
assessment, the court ruled
against Mr. A. Is Mr. A
guilty of fraud? (1%)
(A) Mr. A is not guilty of
fraud as he simply followed
the advice of his lawyer.
(B) Mr. A is guilty of fraud;
 he deliberately did not
report the commission in
the current year when he
should have done so.
(C) Mr. A's lawyer should
pay the tax for giving the
wrong advice. (D) Mr. A is
guilty for failing to consult
his accountant.

XYZ Law Offices, a law

partnership in the
Philippines and a VAT-
registered taxpayer,
received a query by e-mail
from Gainsburg
Corporation, a corporation For income tax purposes, the compensation for services is part of the gross Wh
organized under the laws of income of the law partnership. From its total gross income derived within and en
Delaware, but the e-mail without, it has to compute its net income in the same manner as a Income inco
1 Inco
came from California where corporation. The net income of the partnership whether distributed or not will Taxatio me 2013
3 Gainsburg has an office. me
be declared by the partners as part of their gross income who are to pay the n is
Gainsburg has no office in income tax thereon in their individual capacity. (Sec 26, NIRC) taxa
the Philippines and does no (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) ble
business in the Philippines.
XYZ Law Offices rendered
its opinion on the query
and billed Gainsburg
US$1,000 for the opinion.
Gainsburg remitted its
 payment through Citibank
which converted the
remitted US$1 ,000 to
pesos and deposited the
converted amount in the
XYZ Law Offices account.
What are the tax
implications of the payment
to XYZ Law Offices in terms
of VAT and income taxes?
(7%)

Ren
In the settlement of the
unci
estate of Mr. Barbera who
The BIR is correct that there was taxable gift only insofar as the renunciation atio
died intestate, his wife
of the share of the wife in the conjugal property is concerned. This is a n of
renounced her inheritance
transfer if property without consideration which takes effect during the the
and her share of the Pers
lifetime of the transferor/wife and this qualifies as a taxable gift. (RR Mo. 2- Shar
1 conjugal property in favor Donor’s on
2003). But the renunciation of the wife‟s share it the inheritance e of 2013
4 of their children. The BIR during the settlement of the estate is not a taxable gift considering that the
Tax liabl
the
determined that there was e
property is automatically transferred to the other heirs by operation of law Surv
a taxable gift and thus
due to her repudiation of her inheritance. (BIR Ruling DA No. 333-07) ivin
assessed Mrs. Barbera as a
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) g
donor. Was the BIR
Spo
correct? (7%)
use
 The spouses Jun and Elvira
Sandoval purchased a piece
of land for P5,000,000 and
included their two (2) minor
children as co-purchasers in
the Deed of Absolute Sale.
The Commissioner of
Internal Revenue (CIR)
ruled that there was an
implied donation and
assessed donors' taxes
against the spouses. Rule Requ
Inte
on the CIR's action. (1%) (D) The CIR is correct; there was animus donandi since the children had no isites
nt
1 (A) The CIR is wrong; a financial capacity to be co-purchasers. According to Spouse Donor’s of a
to 2013
5 donation must be express. Evono v. Department of Finance, et. al., CTA EB Case No. 705, June 4, 2012(UP Tax valid
Don
(B) The CIR is wrong; LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) dona
ate
financial capacity is not a tion
requirement for a valid
sale.
(C) The CIR is correct; the
amount involved is huge
and ultimately ends up with
the children.
(D) The CIR is correct; there
was animus donandi since
the children had no
financial capacity to be co-
purchasers.
 Mr. Agustin, 75 years old
and suffering from an
incurable disease, decided
to sell for valuable and Item Tran
sufficient consideration a s to sfer
No. The house and lot were not transferred in contemplation of death
house and lot to his son. He be in
therefore, these properties should not form part of the decedent’s gross
died one year later. In the inclu Con
estate. To qualify as a transfer in contemplation of death, the transfer must be
1 settlement of Mr. Agustin's Estate ded tem
either without consideration or for insufficient consideration. Since the house 2013
6 estate, the BIR argued that Tax in plati
and lot were sold for valuable and sufficient consideration, there is no transfer
the house and lot were gros on
in contemplation of death for estate tax purposes. (Sec 85 (B), NIRC).
transferred in s of
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
contemplation of death and estat Dea
should therefore form part e th
of the gross estate for
estate tax purposes.
Is the BIR correct? (7%)
Mr. Mayuga donated his
residential house and lot to
his son and duly paid the
donor's tax. In the Deed of
Donation, Mr. Mayuga Item
expressly reserved for s to
himself the usufruct over be
Rev
the property for as long as inclu
(A) The property will form part of Mr. Mayuga's gross estate when he dies. oca
1 he lived. Describe the Estate ded
According to Section 85(B), NIRC ble 2013
7 donated property from the Tax in
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tran
taxation perspective. (1%) gros
sfer
(A) The property will form s
part of Mr. Mayuga's gross estat
estate when he dies. e
(B) The property will not
form part of Mr. Mayuga's
gross estate when he dies
because he paid the
 donor's tax.
(C) The property will form
part of Mr. Mayuga's gross
estate because he died
soon after the donation.
(D) The property will not
form part of Mr. Mayuga's
gross estate because it is no
longer his.

Mr. Agustin, 75 years old

and suffering from an
incurable disease, decided
to sell for valuable and Item Tran
sufficient consideration a s to sfer
No. The house and lot were not transferred in contemplation of death
house and lot to his son. He be in
therefore, these properties should not form part of the decedent’s gross
died one year later. In the inclu Con
estate. To qualify as a transfer in contemplation of death, the transfer must be
1 settlement of Mr. Agustin's Estate ded tem
either without consideration or for insufficient consideration. Since the house 2013
8 estate, the BIR argued that and lot were sold for valuable and sufficient consideration, there is no transfer
Tax in plati
the house and lot were gros on
in contemplation of death for estate tax purposes. (Sec 85 (B), NIRC). (UP LAW
transferred in s of
COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
contemplation of death and estat Dea
should therefore form part e th
of the gross estate for
estate tax purposes.
Is the BIR correct? (7%)
 Mr. Mayuga donated his
residential house and lot to
his son and duly paid the
donor's tax. In the Deed of
Donation, Mr. Mayuga
expressly reserved for
himself the usufruct over
the property for as long as
he lived. Describe the
Item
donated property from the
s to
taxation perspective. (1%)
be
(A) The property will form Rev
inclu
part of Mr. Mayuga's gross (A) The property will form part of Mr. Mayuga's gross estate when he dies. oca
1 Estate ded
estate when he dies. According to Section 85(B), NIRC ble 2013
9 Tax in
(B) The property will not (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tran
gros
form part of Mr. Mayuga's sfer
s
gross estate when he dies
estat
because he paid the
e
donor's tax.
(C) The property will form
part of Mr. Mayuga's gross
estate because he died
soon after the donation.
(D) The property will not
form part of Mr. Mayuga's
gross estate because it is no
longer his.
 Mr. Agustin, 75 years old
and suffering from an
incurable disease, decided
to sell for valuable and Item Tran
sufficient consideration a s to sfer
No. The house and lot were not transferred in contemplation of death
house and lot to his son. He be in
therefore, these properties should not form part of the decedent’s gross
died one year later. In the inclu Con
estate. To qualify as a transfer in contemplation of death, the transfer must be
2 settlement of Mr. Agustin's Estate ded tem
either without consideration or for insufficient consideration. Since the house 2013
0 estate, the BIR argued that Tax in plati
and lot were sold for valuable and sufficient consideration, there is no transfer
the house and lot were gros on
in contemplation of death for estate tax purposes. (Sec 85 (B), NIRC).
transferred in s of
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
contemplation of death and estat Dea
should therefore form part e th
of the gross estate for
estate tax purposes.
Is the BIR correct? (7%)
Mr. Mayuga donated his
residential house and lot to
his son and duly paid the
donor's tax. In the Deed of
Donation, Mr. Mayuga Item
expressly reserved for s to
himself the usufruct over be
Rev
the property for as long as inclu
(A) The property will form part of Mr. Mayuga's gross estate when he dies. oca
2 he lived. Describe the Estate ded
According to Section 85(B), NIRC(UP LAW COMPLEX & PHILIPPINE ble 2013
1 donated property from the Tax in
ASSOCIATION OF LAW SCHOOLS) Tran
taxation perspective. gros
sfer
(1%)(A) The property will s
form part of Mr. Mayuga's estat
gross estate when he dies. e
(B) The property will not
form part of Mr. Mayuga's
gross estate when he dies
because he paid the
 donor's tax.
(C) The property will form
part of Mr. Mayuga's gross
estate because he died
soon after the donation.
(D) The property will not
form part of Mr. Mayuga's
gross estate because it is no
longer his.

Mr. Agustin, 75 years old

and suffering from an
incurable disease, decided
to sell for valuable and Item Tran
sufficient consideration a s to sfer
No. The house and lot were not transferred in contemplation of death
house and lot to his son. He be in
therefore, these properties should not form part of the decedent’s gross
died one year later. In the inclu Con
estate. To qualify as a transfer in contemplation of death, the transfer must be
2 settlement of Mr. Agustin's Estate ded tem
either without consideration or for insufficient consideration. Since the house 2013
2 estate, the BIR argued that and lot were sold for valuable and sufficient consideration, there is no transfer
Tax in plati
the house and lot were gros on
in contemplation of death for estate tax purposes. (Sec 85 (B), NIRC).
transferred in s of
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
contemplation of death and estat Dea
should therefore form part e th
of the gross estate for
estate tax purposes.
Is the BIR correct? (7%)
 Mr. Mayuga donated his
residential house and lot to
his son and duly paid the
donor's tax. In the Deed of
Donation, Mr. Mayuga
expressly reserved for
himself the usufruct over
the property for as long as
he lived. Describe the
Item
donated property from the
s to
taxation perspective. (1%)
be
(A) The property will form Rev
inclu
part of Mr. Mayuga's gross (A) The property will form part of Mr. Mayuga's gross estate when he dies. oca
2 Estate ded
estate when he dies. According to Section 85(B), NIRC ble 2013
3 Tax in
(B) The property will not (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Tran
gros
form part of Mr. Mayuga's sfer
s
gross estate when he dies
estat
because he paid the
e
donor's tax.
(C) The property will form
part of Mr. Mayuga's gross
estate because he died
soon after the donation.
(D) The property will not
form part of Mr. Mayuga's
gross estate because it is no
longer his.
 In its final adjustment
return for the 2010 taxable
year, ABC Corp. had excess
tax credits arising from its No. The claim for refund will not prosper. While the law gives the taxpayer an
over-withholding of income option to whether carry-over or claim as refund the excess tax credits shown Taxp
payments. It opted to carry on its final adjustment return, once the option to carry-over has been made, ayer'
TAX
2 over the excess tax credits such option shall be considered irrevocable for that taxable period and no s Refu
REMEDI 2013
4 to the following year. application for cash refund or issuance of a tax credit certificate shall be rem nd
ES
Subsequently, ABC Corp. allowed. (Sec 76, NIRC; CIR v. PL Management International Phils., Inc., April 4, edie
changed its mind and 2011, 647 SCRA 72 (2011) G.R. No. 160949).(UP LAW COMPLEX & PHILIPPINE s
applied for a refund of the ASSOCIATION OF LAW SCHOOLS)
excess tax credits.
Will the claim for refund
prosper? (6%)
In 2010, pursuant to a
Letter of Authority (LA)
issued by the Regional
Director, Mr. Abcede was
assessed deficiency income
taxes by the BIR for the The contention of Mr. Abcede is not tenable. While the general rule is to the
year 2009. He paid the effect that for income tax purposes, a taxpayer must be subject to
Taxp
deficiency. In 2011, Mr. examination and inspection by the internal revenue officers only once in a
ayer'
Abcede received another LA taxable year, this will not apply if there is fraud, irregularity or mistakes as TAX Asse
2 s
for the same year 2009, this determined by the Commissioner. In the instant case, what triggered the REMEDI ssm 2013
5 rem
time from the National second examination is the findings by the BIR that Mr. Abcede’s 2009 return ES ent
edie
Investigation Division, on was fraudulent, accordingly, the examination is legally justified. (Sec 235,
s
the ground that Mr. NIRC)
Abcede's 2009 return was (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
fraudulent. Mr. Abcede
contested the LA on the
ground that he can only be
investigated once in a
taxable year. Decide. (7%)
 I will advise my client not to accept the settlement proposal but instead pay
You are the retained tax
the entire amount of tax that is legally due to the government. On the tax
counsel of ABC Corp. Your
aspect, I will tell my client that a proposed assessment covering deficiency
client informed you that
taxes which are legally due must be fully paid to exonerate the taxpayer from
they have been directly
further liabilities. The unwarranted reduction of the proposed assessment into
approached with a proposal
half and the payment thereof will not close the case but can be re-opened
by a BIR insider (i.e., a
anytime within ten years from discovery so as to collect the correct amount of
middle rank BIR official) on
taxes from ABC Corp. The act of deliberately paying an amount of tax that is
the tax matter they have
less than what is known by my client to be legally due through a cause of
referred to you for Taxp
action that is unlawful is considered as tax evasion. I will advise my client that
handling. The BIR insider's ayer'
conniving with a BIR insider to reduce the proposed assessment for a fee us TAX Asse
2 proposal is to settle the s
unlawful which can expose the officers of the corporation to criminal liability. REMEDI ssm 2013
6 matter by significantly Likewise, the payment to be made to the BIR official of 50% of the savings ES
rem
ent
reducing the assessment, edie
constitutes direct bribery punishable under the Revised Penal Code. Insofar as
but he will get 50% of the s
the BIR officer is concerned he will also be a principal to direct bribery and to
savings arising from the
the criminal violation penalized under Section 269 of the Tax Code. On ethical
reduced assessment.
grounds, agreeing to the settlement scheme being proposed by the BIR insider
What tax, criminal and
is agreeing to the perpetration of a dishonest act. Since taxation is symbiotic
ethical considerations will
relationship, fair dealing on both sides is of paramount importance. I will
you take into account in
remind my client that taxpayers owe honesty to government just as
giving your advice? Explain
government owes fairness to taxpayers. (CIR v. Tokyo Shipping Co. Ltd., G.R.
the relevance of each of
No. 68252, May 26, 1996)
these considerations. (9%)
(UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
 Mr. Alvarez is in the retail
business. He received a
deficiency tax assessment
from the BIR containing
only the computation of the
deficiency tax and the
penalties, without any
explanation of the factual
and legal bases for the
assessment. Is the
assessment valid? (1%) (A)
Taxp
The assessment is valid; all
(B) The assessment is invalid; the law requires a statement of the facts and the ayer'
that Mr. Alvarez has to TAX Asse
2 law upon which the assessment is based. According s
know is the amount of the REMEDI ssm 2013
7 to Section 228, NIRC, Azucena Reyes v. Commissioner(UP LAW COMPLEX & rem
tax. ES ent
PHILIPPINE ASSOCIATION OF LAW SCHOOLS) edie
(B) The assessment is
s
invalid; the law requires a
statement of the facts and
the law upon which the
assessment is based.
(C) The assessment is valid
but Mr. Alvarez can still
contest it. (D) The
assessment is invalid
because Mr. Alvarez has no
way to determine if the
computation is erroneous.
 Taxpayer A was required by
the BIR to sign and submit a
waiver of the statute of
limitations on the
assessment period, to give
the BIR more time to
complete its investigation.
The BIR accepted the
waiver but failed to indicate
the date of its acceptance.
What is the legal status of
the waiver? (1%) (C) The waiver is invalid; the date of acceptance is crucial in counting the start Taxp
(A) The waiver is valid of the period of suspension of the prescriptive period. ayer'
TAX Asse
2 because the date of s
REMEDI ssm 2013
8 acceptance is immaterial According to Commissioner v. Kudos Metal Corp., G.R. No. 178087, May 5,
ES
rem
ent
and unimportant. 2010 edie
(B) The waiver is invalid; the (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) s
taxpayer cannot be
required to waive the
statute of limitations.
(C) The waiver is invalid; the
date of acceptance is
crucial in counting the start
of the period of suspension
of the prescriptive period.
(D) The waiver is valid,
having been accepted by
the BIR.
 Taxpayer Andy received on
January 3, 2010 a
preliminary assessment
notice (PAN) from the BIR,
stating that he had fifteen
(15) days from its receipt to
comment or to file a
protest. Eight (8) days later
(or on January11, 2010),
before he could comment
or file a protest, Andy
received the final
assessment notice (FAN).
Taxp
Decide on the validity of
(A) The FAN is invalid; Andy was not given the chance to respond to the PAN, ayer'
the FAN. (1%) TAX Asse
2 in violation of his due process rights. According to s
(A) The FAN is invalid; Andy REMEDI ssm 2013
9 Section 228, NIRC; RR No. 12-99(UP LAW COMPLEX & PHILIPPINE rem
was not given the chance to ES ent
ASSOCIATION OF LAW SCHOOLS) edie
respond to the PAN, in
s
violation of his due process
rights.
(B) The FAN is invalid for
being premature.
(C) The FAN is valid since it
was issued before the right
to assess prescribed.
(D) The FAN is valid. There
is no legal requirement that
the FAN should await the
protest to the PAN because
protest to the PAN is not
mandatory.
 MSI Corp. imports orange
and lemon concentrates as
raw materials for the fruit
drinks it sells locally. The
Bureau of Customs (BOC)
imposed a 1% duty rate on
the concentrates.
Subsequently, the BOC
changed its position and
held that the concentrates
should be taxed at 7% duty
rate. MSI disagreed with
the ruling and questioned it
in the CTA which upheld
MSI's position. The (A) The appeal should be dismissed because a motion for reconsideration is
Tariff Gov
Commissioner of Customs mandatory. Rem
3 and ern
appealed to the CTA en edie 2013
0 banc without filing a Custom men
According to RA 9282; Rule 8, Revised Rules of the CTA s
s t
motion for reconsideration. (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS)
Resolve the appeal. (1%)
(A) The appeal should be
dismissed because a motion
for reconsideration is
mandatory.
(B) The appeal should be
dismissed for having been
filed out of time.
(C) The appeal should be
given due course since a
motion for reconsideration
is a useless exercise.
(D) The appeal should be
upheld to be fair to the
 government which needs
taxes.

The BIR, through the

Commissioner, instituted a
system requiring taxpayers
to submit to the BIR a
summary list of their sales
and purchases during the
Pow
year, indicating the name of Taxp
ers
the seller or the buyer and ayer'
TAX and
3 the amount. Based on these (D) None of the above. According to Sections 5 and 6, NIRC(UP LAW s
REMEDI Duti 2013
1 lists, the BIR discovered COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) rem
ES es
that in 2004 ABC Corp. edie
of
purchased from XYZ Corp. s
BIR
goods worthP5,000,000.
XYZ Corp. did not declare
these for income tax
purposes as its reported
gross sales for 2004was
only Pl,000,000. Which of
 the following defenses may
XYZ Corp. interpose in an
assessment against it by the
BIR? (1%) (A) The BIR
has no authority to obtain
third party information to
assess taxpayers.
(B) The third party
information is inadmissible
as hearsay evidence. (C)
The system of requiring
taxpayers to submit third
party information is illegal
for violating the right to
privacy. (D)
None of the above.
Congress passed a sin tax
law that increased the tax
rates on cigarettes by
1,000%. The law was
thought to be sufficient to
drive many cigarette
companies out of business,
General Nat
and was questioned in (C) correct because no government can deprive a person of his livelihood Natu
Principl ure
3 court by a cigarette No person shall be deprived of life, liberty, or property without due process of re of
es of of 2013
2 company that would go out law, nor shall any person be denied the equal protection of the laws. (Art. III,
Taxatio
Taxa
Taxa
of business because it Sec. 1 of the Constitution) tion
n tion
would not be able to pay
the increased tax. The
cigarette company is
__________ (1%)
(A) wrong because taxes
are the lifeblood of the
government
 (B) wrong because the law
recognizes that the power
to tax is the power to
destroy
(C) correct because no
government can deprive a
person of his livelihood
(D) correct because
Congress, in this case,
exceeded its power to tax

Mr. Alas sells shoes in

Makati through a retail
store. He pays the VAT on
his gross sales to the BIR
and the municipal license
tax based on the same
gross sales to the City of
Makati. He comes to you
for advice because he
General Doct
thinks he is being subjected (D) Double taxation is allowed where one tax is imposed by the national Dou
Principl rines
3 to double taxation. What government and the other by the local government. According ble
es of in 2013
3 advice will you give him? to CIR v. Solidbank Corp., G.R. No. 148191, Nov. 25, 2003(UP LAW COMPLEX &
Taxatio Taxa
taxa
(1%) (A) PHILIPPINE ASSOCIATION OF LAW SCHOOLS) tion
n tion
Yes, there is double
taxation and it is
oppressive.
(B) The City of Makati does
not have this power.
(C) Yes, there is double
taxation and this is illegal in
the Philippines. (D) Double
taxation is allowed where
 one tax is imposed by the
national government and
the other by the local
government.

Prior to the VAT law, sales

of cars were subject to a
sales tax but the tax applied
only to the original or the
Esca
first sale; the second and
pe
subsequent sales were not
fro
subject to tax. Deltoid
m
Motors, Inc. (Deltoid) hit on
taxa
the idea of setting up a
tion
wholly-owned subsidiary, (C) The plan is improper; the veil of corporate fiction can be pierced so that General Doct
:
Gonmad Motors, Inc. the second sale will be considered the taxable sale. Principl rines
3 Tax
(Gonmad), and of selling its es of in 2013
4 assembled cars to Gonmad Evas
According to Koppel Philippines Inc. v. Yatco, 77 Phil 496 Taxatio Taxa
ion
at a low price so it would (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) n tion
vis-
pay a lower tax on the first
à-vis
sale. Gonmad would then
Tax
sell the cars to the public at
Avoi
a higher price without
dan
paying any sales tax on this
ce
subsequent sale.
Characterize the
arrangement. (1%)
A. The plan is a legitimate
 exercise of tax planning and
merely takes advantage of a
loophole in the law.
B. The plan is legal because
the government collects
taxes anyway.
C. The plan is improper; the
veil of corporate fiction can
be pierced so that the
second sale will be
considered the taxable sale.
D. The government must
respect Gonmad's separate
juridical personality and
Deltoid's taxable sale to it.

The municipality of San

Isidro passed an ordinance
imposing a tax on
installation managers. At
that time, there was only
one installation manager in Scop
Con
the municipality; thus, only e
General stitu
he would be liable for the and
(C) It is constitutional as it applies to all persons in that class. Principl tion
3 tax. Is the law Limit
According to Shell Co. of P.I. v. Vaño, 94 Phil 387(UP LAW COMPLEX & es of al 2013
5 constitutional? (1%) ation
PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio limit
(A) It is unconstitutional of
n atio
because it clearly Taxa
ns
discriminates against this tion
person.
(B) It is unconstitutional for
lack of legal basis.
(C) It is constitutional as it
applies to all persons in that
 class. (D) It is
constitutional because the
power to tax is the power
to destroy.

A group of philanthropists
organized a non-stock, non-
profit hospital for charitable
purposes to provide Yes. Accordingly, Justice Hilario G. Davide, Jr., a former constitutional
medical services to the commissioner, who is now a member of this Court, stressed during the
poor. The hospital also Concom debates that ". . . what is exempted is not the institution itself . . .; Scop
Con
accepted paying patients those exempted from real estate taxes are lands, buildings and improvements e
General stitu
although none of its income actually, directly and exclusively used for religious, charitable or educational and
Principl tion
3 accrued to any private purposes." Father Joaquin G. Bernas, an eminent authority on the Constitution Limit
es of al 2013
6 individual; all income were and also a member of the Concom, adhered to the same view that the
Taxatio
ation
limit
plowed back for the exemption created by said provision pertained only to property taxes. In his of
n atio
hospital's use and not more treatise on taxation, Mr. Justice Jose C. Vitug concurs, stating that "[t]he tax Taxa
ns
than 30% of its funds were exemption covers property taxes only." Indeed, the income tax exemption tion
used for administrative claimed by private respondent finds no basis in Article VI, Section 26, par. 3 of
purposes. the Constitution. (CIR v. CA, GR No. 124043. October 14, 1998)
Is the hospital subject to tax
on its income? If it is, at
what rate? (6%)
 Mr. Amado leased a piece
Con
of land owned by the
stitu
Municipality of
tion
Pinagsabitan and built a
al
warehouse on the property
Limi
for his business operations. Scop
tati
The Municipal Assessor e
General ons;
assessed Mr. Amado for Yes, the assessment is proper. The land, although owned by the municipality, and
Principl Usa
3 real property taxes on the is not exempt from real property tax because the beneficial use has been Limit
es of ge 2013
7 land and the warehouse. granted to a taxable person. (Sec 234 (a), LGC) ation
Taxatio and
Mr. Amado objected to the (UP LAW COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) of
n not
assessment, contending Taxa
Ow
that he should not be asked tion
ners
to pay realty taxes on the
hip
land since it is municipal
as
property.
basi
Was the assessment
s
proper? (5%)
XYZ Corporation
manufactures glass panels
and is almost at the point of
Attri
insolvency. It has no more
Attri but
cash and all it has are
bute es
unsold glass panels. It
General s or or
received an assessment
(B) It should not grant permission because a tax is generally a pecuniary Principl Char Cha
3 from the BIR for deficiency
burden. According to Characteristics of Taxes(UP LAW es of acter ract 2013
8 income taxes. It wants to
COMPLEX & PHILIPPINE ASSOCIATION OF LAW SCHOOLS) Taxatio istics erist
pay but due to lack of cash,
n of ics
it seeks permission to pay
Taxe of
in kind with glass panels.
s Tax
Should the BIR grant the
es
requested permission?
(1%)(A) It should grant
permission to make
 payment convenient to
taxpayers.
(B) It should not grant
permission because a tax is
generally a pecuniary
burden.
(C) It should grant
permission; otherwise, XYZ
Corporation would not be
able to pay.
(D) It should not grant
permission because the
government does not have
the storage facilities for
glass panels.
Choose the correct answer.
Smuggling - (1%)
(A) does not extend to the
entry of imported or
Impo
exported articles by means
rtati
of any false or fraudulent
on in
invoice, statement or
viola
practices; the entry of
C. Smuggling is committed by any person who shall fraudulently import into Tariff tion
goods at less than the true Smu
the Philippines, or assist in so doing, any article, contrary to law, or shall and of
1 weight or measure; or the uggl 2014
receive, conceal, buy, sell, or any manner facilitate the transportation, Custom tax
filing of any false or ing
knowing the same to have been imported contrary to law. (UST) s credi
fraudulent entry for the
t
payment of drawback or
certi
refund of duties.
ficat
(B) is limited to the import
e
of contraband or highly
dutiable cargo beyond the
reach of customs
authorities.
(C) is committed by any
person who shall
fraudulently import or bring
into the Philippines, or
assist in so doing, any
article, contrary to law, or
shall receive, conceal, buy,
sell or any manner facilitate
the transportation,
concealment or sale of such
article after importation,
knowing the same to have
been imported contrary to
law.
(D) is punishable by
administrative penalty only.
 In accordance with the
Local Government Code
(LGC), the Sangguniang
Panglungsod (SP) of Baguio
City enacted Tax Ordinance
No. 19, Series of 2014,
imposing a P50.00 tax on all
the tourists and travellers
going to Baguio City. In
imposing the local tax, the
SP reasoned that the tax
Gra
collected will be used to
nt
maintain the cleanliness of No, the petition for certiorarifiled by Baguio City will not prosper. As stated in
Natu of
Baguio City and for the ValleyTrading Co., Inc. v. CFI of Isabela(G.R. No. L-49529, March 31, 1989) and
re loca
beautification of its tourist Angeles City v. Angeles City Electric Corporation(G.R. No. 166134, June 29,
Local and l
attractions.Claiming the tax 2010), the prohibition on the issuance of an order or writ enjoining the
Govern Sour taxi
to be unjust, Baguio collection of taxes applies only to national internal revenue taxes, and
2 ment ce of ng 2014
Travellers Association not to local taxes. Unlike the NIRC, there is no express provision in the
Taxatio Taxi pow
(BTA), an association of Local Government Code which prohibits courts from enjoining the
n ng er
travel agencies in Baguio collection of such taxes. Therefore, the RTC was properly vested with
Pow und
City, filed a petition for authority to issue the assailed TRO enjoining Baguio City from imposing the
er er
declaratory relief before local tax. (UST)
the
the Regional Trial Court
LGC
(RTC) because BTA was
apprehensive that tourists
might cancel their bookings
with BTA’s member
agencies. BTA also prayed
for the issuance of a
Temporary Restraining
Order (TRO) to enjoin
Baguio City from enforcing
the local tax on their
customers and on all
 tourists going to Baguio
City.The RTC issued a TRO
enjoining Baguio City from
imposing the local tax.
Aggrieved, Baguio City filed
a petition for certiorari
before the Supreme Court
(SC) seeking to set aside the
TRO issued by the RTC on
the ground that collection
of taxes cannot be
enjoined. Will the petition
prosper? (5%)

Madam X owns real The administrative remedies available to Madam Xto contest the Con
property in Caloocan City. assessment and their respective prescriptive periods are as follows: testi
On July 1, 2014, she 1. Pay the deficiency real property tax under protest (Section 252, LGC); Taxp ng
received a notice of 2. File the protest with the local treasurer –The protest in writing muse be ayer' an
assessment from the City filed within s asse
Real
Assessor, informing her of a thirty (30) days from payment of the tax to the provincial, city, or municipal rem ssm
Propert
deficiency tax on her treasurer, edie ent
3 y 2014
property. She wants to in the case of a municipality within Metropolitan Manila Area, who shall s of
Taxatio
contest the assessment. decide the (Real valu
n
(4%) protest within sixty (60) days from receipt (Section 252, LGC); Prop e of
3. Appeal to the LBAA –If protest is denied or upon the lapse of the 60-day erty real
(A) What are the period for Tax) pro
administrative remedies the treasurer to decide, the taxpayer may appeal to the LBAA within 60 pert
available to Madam X in days and the case decided within 120 days (Section 226 & 229, LGC) y
 order to contest the 4. Appeal to the CBAA –If not satisfied with the decision of the LBAA, appeal to
assessment and their the CBAA within 30 days from receipt of a copy of the decision (Section 229(c),
respective prescriptive LGC). (UST)
periods?

Madam X owns real

property in Caloocan City. Pay
Taxp
On July 1, 2014, she men
No. The payment of the deficiency tax is a condition before she can ayer'
received a notice of t of
protest the deficiency assessment. It is the decision on the protestor s
assessment from the City Real real
inaction thereon that gives herthe right to appeal. This means that she rem
Assessor, informing her of a Propert pro
cannot refuse to pay the deficiency tax assessment during the pendency edie
4 deficiency tax on her y pert 2014
of the appeal because it is the payment itself which gives rise to the remedy. s
property. She wants to Taxatio y
The law provides that no protest (which is the beginning of the disputation (Real
contest the assessment. n und
process) shall be entertained unless the taxpayer first pays the tax Prop
(4%)(B) May Madam X er
(Section 252, LGC). (UST) erty
refuse to pay the deficiency prot
Tax)
tax assessment during the est
pendency of her appeal?
 "Doñ a Evelina, a rich widow
engaged in the business of
currency exchange, was
assessed a considerable
amount of local business
taxes by the City clai
Government of Bagnet by m
virtue of Tax Ordinance No. for
24. Despite her objections refu
thereto, Doñ a Evelina paid nd
the taxes. Nevertheless, of
unsatisfied with said Tax tax
Ordinance, Doñ a Evelina, Taxp cred
through her counsel Atty. ayer' it
ELP, filed a written claim for s for
Local
recovery of said local rem erro
Govern
business taxes and Move for the execution of the judgment which has already become final. edie neo
5 ment 2014
contested the assessment. (UST) s usly
Taxatio
Her claim was denied, and (Loc or
n
so Atty. ELP elevated her al illeg
case to the Regional Trial Taxe ally
Court (RTC). s) coll
The RTC declared Tax ecte
Ordinance No. 24 null and d
void and without legal tax,
effect for having been fee
enacted in violation of the or
publication requirement of char
tax ordinances and revenue ge
measures under the Local
Government Code (LGC)
and on the ground of
double taxation. On appeal,
the Court of Tax Appeals
(CTA) affirmed the decision
of the RTC. No motion for
reconsideration was filed
and the decision became
final and executory. (4%)"

(A) If you are Atty. ELP,

what advice will you give
Doñ a Evelina so that she
can recover the subject
local business taxes?
 "Doñ a Evelina, a rich widow
engaged in the business of
currency exchange, was
assessed a considerable
amount of local business
taxes by the City
Government of Bagnet by
virtue of Tax Ordinance No.
24. Despite her objections
thereto, Doñ a Evelina paid
the taxes. Nevertheless,
Com
unsatisfied with said Tax Com
mon
Ordinance, Doñ a Evelina, mon
Limi
through her counsel Atty. Limit
tati
ELP, filed a written claim for ation
Yes, subject to the tax benefit rule. The local business tax paid is a business- Local ons
recovery of said local s on
connected tax hence, deductible from gross income. If at the time of its Govern on
business taxes and the
6 deduction it resulted to a tax benefit to Dona Evelina, then the recovery will ment the 2014
contested the assessment. taxin
form part of gross income to the extent of the tax benefit on the previous Taxatio taxi
Her claim was denied, and g
deduction (Section 34(C)(1), NIRC). (UST) n ng
so Atty. ELP elevated her pow
pow
case to the Regional Trial ers
ers
Court (RTC).The RTC of
of
declared Tax Ordinance No. LGU
LGU
24 null and void and
without legal effect for
having been enacted in
violation of the publication
requirement of tax
ordinances and revenue
measures under the Local
Government Code (LGC)
and on the ground of
double taxation. On appeal,
the Court of Tax Appeals
(CTA) affirmed the decision
of the RTC. No motion for
reconsideration was filed
and the decision became
final and executory.
(4%)"(B) If Doñ a Evelina
eventually recovers the
local business taxes, must
the same be considered as
income taxable by the
national government?
 Dr. Taimtim is an alumnus
of the College of Medicine
of Universal University
(UU), a privately-owned
center for learning which
grants yearly dividends to
its stockholders.UU has a
famous chapel located
within the campus where
the old folks used to say
that anyone who wanted to
pass the medical board
examinations should offer a
No. the donation is not deductible. The chapel is owned by a privately-owned Ded
dozen roses on all the
university hence, the donation for the maintenance of the chapel is a ucti
Sundays of October. This
donation to the university. The donation to be deductible must comply ons
was what Dr. Taimtim did Gros
with the requirement that the net income of the done must not inure to the Income fro
when he was still reviewing s
7 benefit of any private stockholder or individual. In the instant case, the Taxatio m 2014
for the board examinations. Inco
university is granting yearly dividends to its stock holders which is a clear n Gro
In his case, the folk saying me
violation of the law appertaining to the so-called “private inurement ss
proved to be true because
doctrine” thereby making the donation non-deductible (Section 34(H)(1), Inco
he is now a successful
NIRC). (UST) me
cardiologist. Wanting to
give back to the chapel and
help defray the costs of its
maintenance, Dr. Taimtim
donated P50,000.00 to the
caretakers of the chapel
which was evidenced by an
acknowledgment receipt.In
computing his net taxable
income, can Dr.Taimtim use
his donation to the chapel
as an allowable deduction
from his gross income
 under the National Internal
Revenue Code (NIRC)? (4%)

Mr. Gipit borrowed from

Mr. Maunawain
P100,000.00, payable in five
(5) equal monthly No. Section 50 of Rev. Regs. No. 2, otherwise known as Income Tax
Sour
installments. Before the Regulations, provides
ces
first installment became that if a debtor performs services for a creditor who cancels the debt in
of
due, Mr. Gipit rendered consideration for such services, the debtor realizes income to that
Income Inco inco
general cleaning services in amount as
8 Taxatio me me 2014
the entire office building of compensation forhis services. In the given problem, the cancellation of
n Tax subj
Mr. Maunawain, and as Mr. Gipit’s indebtedness up to the amount of Php 75,000.00 gave rise
ect
compensation therefor, Mr. to compensation income subject to income tax, since Mr. Maunawain
to
Maunawain cancelled the condoned such amount as consideration for the general cleaning services
tax
indebtedness of Mr. Gipit rendered by Mr. Gipit. (UST)
up to the amount of
P75,000.00. Mr. Gipit
claims that the cancellation
 of his indebtedness cannot
be considered as gain on his
part which must be subject
to income tax, because
according to him, he did not
actually receive payment
from Mr. Maunawain for
the general cleaning
services. Is Mr. Gipit
correct? Explain. (4%)

Which of the following is an

Excl
exclusion from gross
usio
income? (1%)
ns
(A) Salaries and wages Gros
Income fro
(B) Cash dividends s
9 D. De minimis benefits (UST) Taxatio m 2014
(C) Liquidating dividends Inco
n Gro
after dissolution of a me
ss
corporation
Inco
(D) De minimis benefits
me
(E) Embezzled money
Triple Star, a domestic
corporation, entered into a
No. Pursuant to the case of Commissioner of Internal Revenue v. Baier-
Management Service
Nickel(G.R. No. 153793, August 29, 2006), the factor which determines the
Contract with Single Star, a
source of income for personal services isthe place where the services
non-resident foreign Gros Situ
were actually rendered. Since Single Star, a non-resident foreign Income
1 corporation with no s s of
corporation, will perform all the managerial services for Triple Star’s Taxatio 2014
0 property in the Philippines. branch in Hong Kong, all compensation income arising from the n
Inco Taxa
Under the contract, Single me tion
performance of such services will be considered income from sources
Star shall provide
outside the Philippines, and therefore not subject to Philippine income tax.
managerial services for
(UST)
Triple Star’s Hongkong
branch. All said services
 shall be performed in
Hongkong.Is the
compensation for the
services of Single Star
taxable as income from
sources within the
Philippines? Explain. (4%)

Which of the following

should not be claimed as
deductions from gross
income? (1%)
(A) discounts given to
Ded
senior citizens on certain
ucti
goods and services.
on
(B) advertising expense to Gros
B. Advertising expense to maintain some form of goodwill for the taxpayer’s Income fro
1 maintain some form of s
business. Taxatio m 2014
1 goodwill for the Inco
(UST) n Gro
taxpayer’s business. me
ss
(C) salaries and bonuses
Inco
paid to employees.
me
(D) interest payment on
loans for the purchase of
machinery and
equipment used in
business.
 Hopeful Corporation
obtained a loan from
Generous Bank and
executed a mortgage on its
No. Since Hopeful Corporationexercised its right to redeem the property,
real property to secure the
Generous Bankis
loan. When Hopeful
not liable to pay capital gains tax on the foreclosure sale. As stated in the
Corporation failed to pay
analogous case
the loan, Generous Bank Taxa
of Supreme Transliner, Inc., v. BPI Family Savings Bank, Inc. (G.R. No. 165617, Taxa
extrajudicially foreclosed tion
February 25, 2011, 644 SCRA 59), Rev. Regs. No. 4-99 expressly provides that if tion
the mortgage on the of
a mortgagor exercises his right of redemption within one year from the Income of
1 property and acquired the dom
issuance of the certificate of sale, no capital gains tax shall be imposed Taxatio capi 2014
2 same as the highest bidder. because no sale or transfer of real property was realized. It is only in case of n
estic
tal
A month after the corp
non-redemption by Hopeful Corporation that the obligation to pay capital gain
foreclosure, Hopeful orati
gains tax arises, which shall be based on the bid price of the highest bidder. s
Corporation exercised its ons
The tax will be imposed only upon the expiration of the one-year period of
right of redemption and
redemption. Furthermore, the obligation to pay the capital gains tax would
was able to redeem the
primarily fall on the mortgagor, Hopeful Corporation, and not on Generous
property. Is Generous Bank
Bank. (UST)
liable to pay capital gains
tax as a result of the
foreclosure sale? Explain.
(4%)
 On August 31, 2014,
Haelton Corporation (HC),
thru its authorized
representative Ms. Pares,
sold a 16-storey
commercial building known
as Haeltown Building to Mr.
Belly for P100 million. Mr.
Belly, in turn, sold the same
property on the same day
to Bell Gates, Inc. (BGI) for
P200 million. These two (2)
transactions were
evidenced by two (2) The tax planning scheme adopted by Haeltown Corporation constitutes Taxa
separate Deeds of Absolute tax evasion. According to CIR v. Estate of Benigno Toda(G.R. No. 147188, tion
Gen
Sale notarized on the same September 14, 2004), a transaction where a taxpayer made it appear that of
Income eral
1 day by the same notary there were two sales of the property was considered “tainted with dom
Taxatio Prin 2014
3 public.Investigations by the fraud.” The sole purpose of acquiring and transferring title of the property on
n
estic
cipl
Bureau of Internal Revenue the same day was to create a tax shelter. The sale toMr. Belly (which is subject corp
es
(BIR) showed that: (1) the to individual capital gains tax) was to mislead the BIR and avoid the higher orati
Deed of Absolute Sale corporate income tax. (UST) ons
between Mr. Belly and BGI
was notarized ahead of the
sale between HC and Mr.
Belly; (2) as early as May
17, 2014, HC received P40
million from BGI, and not
from Mr. Belly; (3) the said
payment of P40 million was
recorded by BGI in its books
as of June 30, 2014 as
investment in Haeltown
Building; and (4) the
substantial portion of P40
million was withdrawn by
Ms. Pares through the
declaration of cash
dividends to all its
stockholders.Based on the
foregoing, the BIR sent
Haeltown Corporation a
Notice of Assessment for
deficiency income tax
arising from an alleged
simulated sale of the
aforesaid commercial
building to escape the
higher corporate income
tax rate of thirty percent
(30%). What is the liability
of Haeltown Corporation, if
any? (4%)
 A, B, and C, all lawyers,
formed a partnership called
ABC Law Firm so that they
can practice their
profession as lawyers. For
the year 2012, ABC Law
Firm received earnings and
paid expenses, among
which are as follows:
(6%)Earnings:(1)
The three (3) items of earnings should be included in the computation of ABC
Professional/legal fees from
Law Firm’sgross income. The professional/legal fees from various clients is Sour
various clients(2) Cash prize
included as part of gross income being in the nature of compensation for ces
received from a religious
services (Section 32(A)(1), NIRC). The cash prize from a religious society in of
society in recognition of
recognition of its exemplaryservices is also included there being no law Income Inco inco
1 theexemplary service of
providing for its exclusion. This is not a prize in recognition of any of Taxatio me me 2014
4 ABC Law Firm(3) Gains the achievements enumerated under the law hence, should form part of n Tax subj
derived from sale of excess
gross income (Section 32(B)(7)(c), NIRC). The gains from sale of excess ect
computers and
computers and laptops should also be included as part of the firm’s to
laptopsPayments:(1)
gross income because the term gross income specifically includes gains tax
Salaries of office staff(2)
derived from dealings in property (Section 32(A)(3), NIRC). (UST)
Rentals for office space(3)
Representation expenses
incurred in meetings with
client(A) What are the
items in the above
mentioned earnings which
should be included in the
computation of ABC Law
Firm’s gross income?
Explain.
 A, B, and C, all lawyers,
formed a partnership called
ABC Law Firm so that they
can practice their
profession as lawyers. For
the year 2012, ABC Law
Firm received earnings and
paid expenses, among
which are as follows: (6%)
Earnings:
(1) Professional/legal fees
from various clients Taxa
(2) Cash prize received from The law firm being formed as general professional partnership is entitled tion Ded
a religious society in to the of ucti
recognition of the same deductions allowed to corporation (Section 26, NIRC). Hence, the three gene on
exemplary service of ABC (3) items of deductions mentioned in the problem are all deductible, they Income ral fro
1
Law Firm being in the nature of ordinary and necessary expenses incurred in the Taxatio prof m 2014
5 (3) Gains derived from sale practice of profession (Section 34(A), NIRC). However, the amount n essio Gro
of excess computers and deductible for representation expenses incurred by a taxpayer engaged in nal ss
laptops sale of services, including a law firm, is subject to a ceiling of 1% of net part Inco
Payments: revenue.(RR No. 10-2002). (UST) ners me
(1) Salaries of office staff hips
(2) Rentals for office space
(3) Representation
expenses incurred in
meetings with client

(B) What are the items in

the above-mentioned
payments which may be
considered as deductions
from the gross income of
ABC Law Firm? Explain
 A, B, and C, all lawyers,
formed a partnership called
ABC Law Firm so that they
can practice their
profession as lawyers. For
the year 2012, ABC Law
Firm received earnings and
paid expenses, among
which are as follows:
(6%)Earnings:(1)
Professional/legal fees from
various clients(2) Cash prize Taxa Con
The net income having been earned by the law firm which is formed
received from a religious tion seq
and qualifies as a general professional partnership, is not subject to income
society in recognition of of uen
tax because the earner is devoid of any income tax personality. Each
theexemplary service of gene ces
partner shall report as gross income his distributive shares, actuality
ABC Law Firm(3) Gains Income ral of
1 or constructively received, in the net income of the partnership. The
derived from sale of excess Taxatio prof pay 2014
6 computers and partnership is merely treated for income tax purposes as a pass-through entity
n essio men
so that its net income is not taxable at the level of the partnership bur saidnet
laptopsPayments:(1) nal t of
income should be attributed to the partners, whether or not distributed to
Salaries of office staff(2) part inco
them, and they are liable to pay the income tax based on their respective
Rentals for office space(3) ners me
taxable income as individual taxpayers (Section 26, NIRC). (UST)
Representation expenses hips tax
incurred in meetings with
client(C) If ABC Law Firm
earns net income in 2012,
what, if any, is the tax
consequence on the part of
ABC Law Firm insofar as the
payment of income tax is
concerned? What, if any, is
the tax consequence on the
part of A, B, and C as
individual partners, insofar
 as the payment of income
tax is concerned?

Freezy Corporation, a
No. The payments made in exchange for the revelation of a competitors
domestic corporation
trade
engaged in the
secrets is considered an expense which is against law, morals, good
manufacture and sale of ice
customs, or Ite
cream, made payments to
public policy, which is not deductible (3M Philippines, Inc. v. CIR, G.R. Gros ms
an officer of Frosty Income
1 No. 82833, September 26, 1988). Also, the law will not allow the s not
Corporation, a competitor Taxatio 2014
7 in the ice cream business, in deduction of bribes, kickback, Inco ded
n
and other similar payments. Applying the principle of ejusdem generis, me uctu
exchange for said officer’s
payment made by ble
revelation of Frosty
Freezy Corporation would fall under “other similar payments” which are not
Corporation’s trade secrets.
allowed as
May Freezy Corporation
deduction from gross income (Section 34(A)(1)(c), NIRC). (UST)
claim the payment to the
 officer as deduction from
its gross income? Explain.
(4%)

In January 2013, your friend

got his first job as an office
clerk. He is single and lives
with his family who
depends upon him for
financial support. His
Ded
parents have long retired
ucti
from their work, and his
on
two (2) siblings are still Gros
Income fro
1 minors and studying in Yes. The law allows a basic personal exemption of Php 50,000.00 for s
Taxatio m 2014
8 grade school. In February each individual taxpayer (Section 35(A), NIRC). (UST) Inco
n Gro
2014, he consulted you as me
ss
he wanted to comply with
Inco
all the rules pertaining to
me
the preparation and filing of
his income tax return. He
now asks you the
following:(A) Is he entitled
to personal exemptions? If
so, how much? (1%)
 In January 2013, your friend
got his first job as an office
clerk. He is single and lives
with his family who
depends upon him for
financial support. His
parents have long retired Ded
from their work, and his ucti
two (2) siblings are still No. While his parents and minor sibling are living with and dependent upon on
Gros
minors and studying in him for financial support, they are not qualified dependents for purposes of Income fro
1 s
grade school. In February additional exemptions. The term “dependent” for purposes of the additional Taxatio m 2014
9 2014, he consulted you as Inco
personal exemption would include only legitimate, illegitimate, or legally n Gro
me
he wanted to comply with adopted children (Section 35(B), NIRC) (UST) ss
all the rules pertaining to Inco
the preparation and filing of me
his income tax return. He
now asks you the following:

(B) Is he entitled to
additional exemptions? If
so, how much? (1%)
In January 2013, your friend
got his first job as an office
clerk. He is single and lives
with his family who
depends upon him for
The taxes withheld from his salaries will not affect his taxable income because Wit
financial support. His Income Inco
2 they are not allowed as tax deductions but as tax credits. Tax deductions hhol
parents have long retired Taxatio me 2014
0 from their work, and his reduce taxable income while tax credits reduce the tax liability (Central Drug ding
n Tax
Corporation v. CIR). (UST) tax
two (2) siblings are still
minors and studying in
grade school. In February
2014, he consulted you as
he wanted to comply with
 all the rules pertaining to
the preparation and filing of
his income tax return. He
now asks you the following:

(C) What is the effect of the

taxes withheld from his
salaries on his
taxable income? (2%)

Mr. De Sarapen is a
candidate in the upcoming
Senatorial elections. Mr. De
Almacen, believing in the
The answer must be qualified. Section 99(C) of the NIRC explicitly
sincerity and ability of Mr.
provides that any contribution in cash or in kind to any candidate,
De Sarapen to introduce
political party or coalition of parties for campaign purposes shall be Con
much needed reforms in
governed by the Election Code, as amended. On the other hand, Section trib
the country, contributed
13 of the Republic Act No. 7166 specifically states that any provision of law to utio
P500,000.00 in cash to the
the contrary notwithstanding, any contribution in cash or kind to any Pers n
campaign chest of Mr. De
2 candidate or political party or coalition of parties for campaign purposes, Donor’s on for
Sarapen. In addition, Mr. De 2014
1 duly reports to the Commission on Elections (COMELEC) shall not be subject to Tax liabl Elec
Almacen purchased
the payment of any gift tax.Thus, if Mr. De Almacen reported his campaign e tion
tarpaulins, t-shirts,
contributions of Php 500,000.00 in cash, tarpaulins, t-shirts, umbrellas, Cam
umbrellas, caps and other
caps, and other campaign materials to the COMELEC,then the BIR cannot paig
campaign materials that he
impose donor’s tax on such contributions. Conversely, if Mr. De Almacen n
also donated to Mr. De
failed to report these campaign contributions to the COMELEC, such
Sarapen for use in his
contributions would be subject to donor’s tax. (UST)
campaign. Is the
contribution of cash and
campaign materials subject
to donor’s tax? (4%)
 "Mr. X, a Filipino residing in
Alabama, U.S.A., died on
January 2, 2013 after
undergoing a major heart
surgery. He left behind to
his wife and two (2) kids
several properties, to wit:
(4%)
(1) Family home in Makati
with
City;
resp
(2) Condominium unit in Las
Com ect
Piñ as City;
posit to
(3) Proceeds of health (A) All the items of properties enumerated in the problem shall form part of
ion non
insurance from Take Care, a the gross
2 Estate of resi
health estate of Mr. X. The composition of the gross estate of a decedent who is a 2014
2 maintenance organization Tax Gros den
Filipino citizen shall include all of his properties, real or personal, tangible or
s t
in the Philippines; and intangible, wherever situated (Section 85, NIRC). (UST)
Estat Filip
(4) Land in Alabama, U.S.A.
e ino
The following expenses
citiz
were paid:
en
(1) Funeral expenses;
(2) Medical expenses; and
(3) Judicial expenses in the
testate proceedings."

(A) What are the items that

must be considered as part
of the gross estate income
of Mr. X?
 "Mr. X, a Filipino residing in
Alabama, U.S.A., died on
January 2, 2013 after
undergoing a major heart
surgery. He left behind to
his wife and two (2) kids
several properties, to wit:
(4%)(1) Family home in
Makati City;(2)
Condominium unit in Las Ded
B) All the items of expenses are deductible from his gross estate. Ded
Piñ as City;(3) Proceeds of ucti
However, the allowable amount of funeral expenses shall be 5% of the gross uctio
health insurance from Take ons
2 estate or actual whicheveris lower, but in no case shall the amount deductible Estate ns
Care, a healthmaintenance fro 2014
3 go beyond Php 200,000.00. Likewise, the deductible medical expenses must Tax from
organization in the m
be limited to those incurred within one year prior to his death but not to Estat
Philippines; and(4) Land in Esta
exceed Php 500,000.00 (Section 86, NIRC). (UST) e
Alabama, U.S.A.The te
following expenses were
paid:(1) Funeral
expenses;(2) Medical
expenses; and(3) Judicial
expenses in the testate
proceedings."(B) What are
the items that may be
considered as deductions
from the gross estate?
 During his lifetime, Mr.
Sakitin obtained a loan
amounting to P10 million
from Bangko Uno for the
purchase of a parcel of land
located in Makati City,
using such property as
collateral for the loan. The
loan was evidenced by a
duly notarized promissory
note. Subsequently, Mr.
Yes. Unpaid mortgages upon, or any indebtedness with respect to property
Sakitin died. At the time of
are deductible from the gross estate only if the value of the decedent’s Ded
his death, the unpaid Unp
interest in said property, undiminished by such mortgage or indebtedness, is uctio
balance of the loan aid
2 included in the gross estate (Section 86(A)(1)(e)).In the instant case, the Estate ns
amounted to P2 million. mor 2014
4 The heirs of Mr. Sakitin interest of the decedent in the property purchased from the loan where the Tax from
tgag
said property was used as the collateral, was not included in the gross estate. Estat
deducted the amount of P2 e
Accordingly, the unpaid balance of the loan at the time of Mr. Sakitin’s death e
million from the gross
is not deductible as “Claims against the Estate". (UST)
estate, as part of the
“Claims against the Estate.”
Such deduction was
disallowed by the Bureau of
Internal Revenue (BIR)
Examiner, claiming that the
mortgaged property was
not included in the
computation of the gross
estate. Do you agree with
the BIR? Explain. (4%)
 "Mr. X, a Filipino residing in
Alabama, U.S.A., died on
January 2, 2013 after
undergoing a major heart
surgery. He left behind to
his wife and two (2) kids
several properties, to wit:
(4%)(1) Family home in with
Makati City;(2) resp
Condominium unit in Las Com ect
Piñ as City;(3) Proceeds of posit to
health insurance from Take (A) All the items of properties enumerated in the problem shall form part of ion non
2 Care, a healthmaintenance the gross estate of Mr. X. The composition of the gross estate of a decedent Estate of resi
2014
5 organization in the who is a Filipino citizen shall include all of his properties, real or personal, Tax Gros den
Philippines; and(4) Land in tangible or intangible, wherever situated (Section 85, NIRC). (UST) s t
Alabama, U.S.A.The Estat Filip
following expenses were e ino
paid:(1) Funeral citiz
expenses;(2) Medical en
expenses; and(3) Judicial
expenses in the testate
proceedings."(A) What are
the items that must be
considered as part of the
gross estate income of Mr.
X?
 "Mr. X, a Filipino residing in
Alabama, U.S.A., died on
January 2, 2013 after
undergoing a major heart
surgery. He left behind to
his wife and two (2) kids
several properties, to wit:
(4%)
(1) Family home in Makati
City;
(2) Condominium unit in Las B) All the items of expenses are deductible from his gross estate.
Piñ as City; However, the Ded
Ded
(3) Proceeds of health allowable amount of funeral expenses shall be 5% of the gross estate or ucti
uctio
insurance from Take Care, a actual whichever ons
2 Estate ns
health is lower, but in no case shall the amount deductible go beyond Php fro 2014
6 maintenance organization Tax from
200,000.00. Likewise, m
Estat
in the Philippines; and the deductible medical expenses must be limited to those incurred within one Esta
e
(4) Land in Alabama, U.S.A. year prior to his death but not to exceed Php 500,000.00 (Section 86, NIRC). te
The following expenses (UST)
were paid:
(1) Funeral expenses;
(2) Medical expenses; and
(3) Judicial expenses in the
testate proceedings."

(B) What are the items that

may be considered as
deductions from the gross
estate?
 During his lifetime, Mr.
Sakitin obtained a loan
amounting to P10 million
from Bangko Uno for the
purchase of a parcel of land
located in Makati City,
using such property as
collateral for the loan. The
loan was evidenced by a
duly notarized promissory
note. Subsequently, Mr.
Yes. Unpaid mortgages upon, or any indebtedness with respect to property
Sakitin died. At the time of
are deductible from the gross estate only if the value of the decedent’s Ded
his death, the unpaid Unp
interest in said property, undiminished by such mortgage or indebtedness, is uctio
balance of the loan aid
2 included in the gross estate (Section 86(A)(1)(e)).In the instant case, the Estate ns
amounted to P2 million. mor 2014
7 The heirs of Mr. Sakitin interest of the decedent in the property purchased from the loan where the Tax from
tgag
said property was used as the collateral, was not included in the gross estate. Estat
deducted the amount of P2 e
Accordingly, the unpaid balance of the loan at the time of Mr. Sakitin’s death e
million from the gross
is not deductible as “Claims against the Estate". (UST)
estate, as part of the
“Claims against the Estate.”
Such deduction was
disallowed by the Bureau of
Internal Revenue (BIR)
Examiner, claiming that the
mortgaged property was
not included in the
computation of the gross
estate. Do you agree with
the BIR? Explain. (4%)
 "Mr. X, a Filipino residing in
Alabama, U.S.A., died on
January 2, 2013 after
undergoing a major heart
surgery. He left behind to
his wife and two (2) kids
several properties, to wit:
(4%)
(1) Family home in Makati
with
City;
resp
(2) Condominium unit in Las
Com ect
Piñ as City;
posit to
(3) Proceeds of health (A) All the items of properties enumerated in the problem shall form part of
ion non
insurance from Take Care, a the gross
2 Estate of resi
health estate of Mr. X. The composition of the gross estate of a decedent who is a 2014
8 maintenance organization Tax Gros den
Filipino citizen shall include all of his properties, real or personal, tangible or
s t
in the Philippines; and intangible, wherever situated (Section 85, NIRC). (UST)
Estat Filip
(4) Land in Alabama, U.S.A.
e ino
The following expenses
citiz
were paid:
en
(1) Funeral expenses;
(2) Medical expenses; and
(3) Judicial expenses in the
testate proceedings."

(A) What are the items that

must be considered as part
of the gross estate income
of Mr. X?
 "Mr. X, a Filipino residing in
Alabama, U.S.A., died on
January 2, 2013 after
undergoing a major heart
surgery. He left behind to
his wife and two (2) kids
several properties, to wit:
(4%)(1) Family home in
Makati City;(2)
Condominium unit in Las Ded
B) All the items of expenses are deductible from his gross estate. Ded
Piñ as City;(3) Proceeds of ucti
However, the allowable amount of funeral expenses shall be 5% of the gross uctio
health insurance from Take ons
2 estate or actual whicheveris lower, but in no case shall the amount deductible Estate ns
Care, a healthmaintenance fro 2014
9 go beyond Php 200,000.00. Likewise, the deductible medical expenses must Tax from
organization in the m
be limited to those incurred within one year prior to his death but not to Estat
Philippines; and(4) Land in Esta
exceed Php 500,000.00 (Section 86, NIRC). (UST) e
Alabama, U.S.A.The te
following expenses were
paid:(1) Funeral
expenses;(2) Medical
expenses; and(3) Judicial
expenses in the testate
proceedings."(B) What are
the items that may be
considered as deductions
from the gross estate?
 During his lifetime, Mr.
Sakitin obtained a loan
amounting to P10 million
from Bangko Uno for the
purchase of a parcel of land
located in Makati City,
using such property as
collateral for the loan. The
loan was evidenced by a
duly notarized promissory
note. Subsequently, Mr.
Yes. Unpaid mortgages upon, or any indebtedness with respect to property
Sakitin died. At the time of
are deductible from the gross estate only if the value of the decedent’s Ded
his death, the unpaid Unp
interest in said property, undiminished by such mortgage or indebtedness, is uctio
balance of the loan aid
3 included in the gross estate (Section 86(A)(1)(e)).In the instant case, the Estate ns
amounted to P2 million. mor 2014
0 The heirs of Mr. Sakitin interest of the decedent in the property purchased from the loan where the Tax from
tgag
said property was used as the collateral, was not included in the gross estate. Estat
deducted the amount of P2 e
Accordingly, the unpaid balance of the loan at the time of Mr. Sakitin’s death e
million from the gross
is not deductible as “Claims against the Estate". (UST)
estate, as part of the
“Claims against the Estate.”
Such deduction was
disallowed by the Bureau of
Internal Revenue (BIR)
Examiner, claiming that the
mortgaged property was
not included in the
computation of the gross
estate. Do you agree with
the BIR? Explain. (4%)
 "Mr. X, a Filipino residing in
Alabama, U.S.A., died on
January 2, 2013 after
undergoing a major heart
surgery. He left behind to
his wife and two (2) kids
several properties, to wit:
(4%)(1) Family home in with
Makati City;(2) resp
Condominium unit in Las Com ect
Piñ as City;(3) Proceeds of posit to
health insurance from Take (A) All the items of properties enumerated in the problem shall form part of ion non
3 Care, a healthmaintenance the gross estate of Mr. X. The composition of the gross estate of a decedent Estate of resi
2014
1 organization in the who is a Filipino citizen shall include all of his properties, real or personal, Tax Gros den
Philippines; and(4) Land in tangible or intangible, wherever situated (Section 85, NIRC). (UST) s t
Alabama, U.S.A.The Estat Filip
following expenses were e ino
paid:(1) Funeral citiz
expenses;(2) Medical en
expenses; and(3) Judicial
expenses in the testate
proceedings."(A) What are
the items that must be
considered as part of the
gross estate income of Mr.
X?
 "Mr. X, a Filipino residing in
Alabama, U.S.A., died on
January 2, 2013 after
undergoing a major heart
surgery. He left behind to
his wife and two (2) kids
several properties, to wit:
(4%)
(1) Family home in Makati
City;
(2) Condominium unit in Las B) All the items of expenses are deductible from his gross estate.
Piñ as City; However, the Ded
Ded
(3) Proceeds of health allowable amount of funeral expenses shall be 5% of the gross estate or ucti
uctio
insurance from Take Care, a actual whichever ons
3 Estate ns
health is lower, but in no case shall the amount deductible go beyond Php fro 2014
2 maintenance organization Tax from
200,000.00. Likewise, m
Estat
in the Philippines; and the deductible medical expenses must be limited to those incurred within one Esta
e
(4) Land in Alabama, U.S.A. year prior to his death but not to exceed Php 500,000.00 (Section 86, NIRC). te
The following expenses (UST)
were paid:
(1) Funeral expenses;
(2) Medical expenses; and
(3) Judicial expenses in the
testate proceedings."

(B) What are the items that

may be considered as
deductions from the gross
estate?
 During his lifetime, Mr.
Sakitin obtained a loan
amounting to P10 million
from Bangko Uno for the
purchase of a parcel of land
located in Makati City,
using such property as
collateral for the loan. The
loan was evidenced by a
duly notarized promissory
note. Subsequently, Mr.
Yes. Unpaid mortgages upon, or any indebtedness with respect to property
Sakitin died. At the time of
are deductible from the gross estate only if the value of the decedent’s Ded
his death, the unpaid Unp
interest in said property, undiminished by such mortgage or indebtedness, is uctio
balance of the loan aid
3 included in the gross estate (Section 86(A)(1)(e)).In the instant case, the Estate ns
amounted to P2 million. mor 2014
3 The heirs of Mr. Sakitin interest of the decedent in the property purchased from the loan where the Tax from
tgag
said property was used as the collateral, was not included in the gross estate. Estat
deducted the amount of P2 e
Accordingly, the unpaid balance of the loan at the time of Mr. Sakitin’s death e
million from the gross
is not deductible as “Claims against the Estate". (UST)
estate, as part of the
“Claims against the Estate.”
Such deduction was
disallowed by the Bureau of
Internal Revenue (BIR)
Examiner, claiming that the
mortgaged property was
not included in the
computation of the gross
estate. Do you agree with
the BIR? Explain. (4%)
 In a civil case for
Annulment of Contract of
Sale, plaintiff Ma. Reklamo
presented in evidence the No. The Contract of Sale cannot be admitted in evidence. The document
Contract of Sale which she is clearly taxable because the law imposes a documentary stamp tax
sought to be annulled. No (DST) on Sales and Agreements to Sell, and Memoranda of Sale (Section
documentary stamp tax on 175, NIRC). Since the DST thereon is not paid, the effect is that the Taki
Judic
the Contract of Sale was instrument, document or paper which require by law to be stamped and ng
Judicial ial
3 paid because according to which has been signed, issues, accepted and transferred without being of
Remedi proc 2014
4 plaintiff Ma. Reklamo, there duly stamped shall not be recorded, nor shall it be used in evidence in evid
es edur
was no need to pay the any court until the requisite stamp or stamps shall have been enc
es
same since the sale was not affixed thereto and cancelled (Section 201, NIRC). In the case at bar, no e
registered with the Register documentary stamp tax was paid on the Contract of Sale, hence, it
of Deeds. Plaintiff Ma. cannot be used
Reklamo is now offering the as her evidence in court. (UST)
Contract of Sale as her
evidence. Is the Contract of
Sale admissible? (4%)
Choose the correct answer.
Tax laws - (1%)
(A) may be enacted for the
promotion of private
enterprise or business for
as long as it gives incidental
General Nat
advantage to the public or Natu
D.Tax laws adhere to uniformity and equality when all taxable articles or kinds Principl ure
3 the State re of
of property es of of 2014
5 (B) are inherently Taxa
of the same class are taxable at the same rate. (UST) Taxatio Taxa
legislative; therefore, may tion
n tion
not be delegated
(C) are territorial in nature;
hence, they do not
recognize the
generally-accepted tenets
of international law
 (D) adhere to uniformity
and equality when all
taxable articles or
kinds of property of the
same class are taxable at
the same rate

Choose the correct answer.

Double Taxation ‒ (1%)(A)
is one of direct duplicate
taxations wherein two (2)
taxes must be imposed on
the same subject matter, by
the same taxing authority,
within the same (C) means taxing the same property twice when it should be taxed only once;
jurisdiction, during the it is tantamount to taxing the same person twice by the same jurisdiction for
same period, with the same the same thing.
General Doct
kind or character of tax, "In order to constitute double taxation in the objectionable or prohibited Dou
Principl rines
3 even if the purposes of sense, the same property must be taxed twice when it should be taxed but ble
es of in 2014
6 imposing the same are once; both taxes must be imposed on the same property or subject matter, for
Taxatio Taxa
taxa
different.(B) is forbidden by the same purpose, by the same State, Government, or taxing authority, within tion
n tion
law; and therefore, it is a the same jurisdiction or taxing district, during the same taxing period, and
valid defense against the they must be the same kind or character of tax." (Villanueva v. City of Iloilo, 26
validity of a tax measure.(C) SCRA 578)
means taxing the same
property twice when it
should be taxed only once;
it is tantamount to taxing
the same person twice by
the same jurisdiction for
the same thing.(D) exists
 when a corporation is
assessed with local business
tax as a manufacturer, and
at the same time, value-
added tax as a person
selling goods in the course
of trade or business.

Choose the correct answer.

Tax Avoidance ‒ (1%)
(A) is a scheme used
outside of those lawful
means and, when availed Esca
of, it usually subjects the pe
taxpayer to further or fro
additional civil or criminal General Doct m
liabilities. Principl rines taxa
3 B. Tax avoidance is a tax-saving device within the means sanctioned by law.
(B) is a tax saving device es of in tion 2014
7 within the means (UST)
Taxatio Taxa :
sanctioned by law. n tion Tax
(C) is employed by a Avoi
corporation, the dan
organization of which is ce
prompted more on the
mitigation of tax liabilities
than for
legitimate business
 purpose.
(D) is any form of tax
deduction scheme,
regardless if the same is
legal or not.

Begi
nnin
Under the Tariff and Importation begins when the carrying vessel or aircraft enters the jurisdiction Requ
g
Customs Code, as of the Philippines with intention to unlade therein. Importation is deemed irem
Tariff and
amended: terminated upon payment of the duties, taxes and other charges upon the ents
and endi
1 articles, or secured to be paid, at a port of entry and the legal permit of 2015
Custom ng
a. When does importation for withdrawal shall have been granted, or incase said articles are free impo
s of
begin and when is it of duties, taxes and other charges, until they have legally left the rtati
imp
deemed terminated? (2%) jurisdiction of the customs. (UST) on
orta
tion
Under the Tariff and
Customs Code, as
amended: b. In what easels
is the decision of the
Collector automatically Whenever the decision of the Collector of Customs is adverse to the
Tariff
reviewed by the government, the said decision is automatically elevated to the Rem Tax
and
2 Commissioner o f Customs? Commissioner of Customs for review, and if such decision is affirmed by edie pay 2015
Custom
In what instance/s is the the Commissioner of Customs, the same will be automatically elevated to s er
s
decision o f the and be finally reviewed by the Secretary of Finance. (UST)
Commissioner
automatically appealed to
the Secretary o f Finance?
(4%)
 "LLL is a government
instrumentality created by
Executive Order to be
primarily responsible for
integrating and directing all
reclamation projects for the
National Government. It
was not organized as a
stock or a non-stock
corporation, nor was it
intended to operate
commercially and compete
The reclaimed properties are not subject to real property tax because
in the private market. exe
LLL is a government instrumentality. Instrumentality refers to any agency
By virtue ofits mandate, LLL mpt
of the National Government, not integrated within the department Impo
reclaimed several portions ion
framework vested with special functions or jurisdiction by law, endowed with Real sitio
ofthe foreshore and fro
some if not all corporate powers, administering special funds, and enjoying Propert n of
offshore areas of the m
3 operational autonomy, usually through a charter. Under the law, real property y Real 2015
Manila Bay, some of which real
owned by the Republic of the Philippines (Republic) is exempt from real Taxatio Prop
were within the territorial pro
property tax unless the beneficial use thereof has been granted to a taxable n erty
jurisdiction ofQCity. pert
person. When the title of the real property is transferred to LLL, the Republic Tax
Certificates oftitle to the y
remains the owner of the real property. Thus, such arrangement does not
reclaimed properties in tax
result in the loss of the tax exemption. (UST)
QCity were issued in the
name ofLLL in 2008. In
2014, Q City issued
Warrants of Levy on said
reclaimed properties of LLL
based on the assessment
for delinquent property
taxes for the years 2010 to
2013."

a. Are the reclaimed

properties registered in the
 name ofLLL subject to real
property tax? (4%)

"LLL is a government
instrumentality created by
Executive Order to be
primarily responsible for
integrating and directing all
reclamation projects for the Pow
National Government. It Impo er
No. As a rule, properties owned by the Republic of the Philippines are
was not organized as a Real sitio to
exempt from real property tax except when the beneficial use thereof has
stock or a non-stock Propert n of levy
been granted, for consideration or otherwise, to a taxable person. LLL leased
4 corporation, nor was it y Real real 2015
out portions of the reclaimed properties to a taxable entity, such as the
intended to operate Taxatio Prop pro
popular fastfood restaurant, hence the reclaimed properties are subject to
commercially and compete n erty pert
real property tax. (UST)
in the private market.By Tax y
virtue ofits mandate, LLL tax
reclaimed several portions
ofthe foreshore and
offshore areas of the
Manila Bay, some of which
were within the territorial
 jurisdiction ofQCity.
Certificates oftitle to the
reclaimed properties in
QCity were issued in the
name ofLLL in 2008. In
2014, Q City issued
Warrants of Levy on said
reclaimed properties of LLL
based on the assessment
for delinquent property
taxes for the years 2010 to
2013."b. Will your answer
be the same in (a) iffrom
2010 to the present time,
LLL is leasing portions ofthe
reclaimed properties for
the establishment and use
o f popular fastfood
restaurants J Burgers, G
Pizza, and K Chicken? (2%)
In 2014, M City approved Com
Com
an ordinance levying mon
mon
customs duties and fees on Limi
Limit
goods coming into the tati
ation
territorial jurisdiction of the Yes, on the groundthat the ordinance is ultra-vires. The taxing powers of local Local ons
s on
city. Said city ordinance was government units, such as M City, cannot extend to the levy of taxes, Govern on
the
5 duly published on February fees and charges already imposed by the national government, and this ment the 2015
taxin
15, 2014 with effectivity include, among others, the levy of customs duties under the Tariff and Taxatio taxi
g
date on March 1, 2014. Customs Code. (UST) n ng
pow
pow
ers
a. Is there a ground for ers
of
opposing said ordinance? of
LGU
(2%) LGU
 In 2014, M City approved
an ordinance levying
customs duties and fees on Que
Taxp
goods coming into the stio
Any question on the constitutionality or legality of tax ordinances may be ayer'
territorial jurisdiction of the n
raised on appeal within thirty (30) days from the effectivity to the s
city. Said city ordinance was Local the
Secretary of Justice. The Secretary of Justice shall render a decision rem
duly published on February Govern lega
within sixty (60) days from the date of receipt of the appeal. Thereafter, within edie
6 15, 2014 with effectivity ment lity 2015
thirty (30) day after receipt of the decision or the lapse of the sixty-day s
date on March 1, 2014. Taxatio of
period without the Secretary of Justice acting upon the appeal, the (Loc
n tax
aggrieved party may file the appropriate proceedings with the Regional Trial al
b. What is the proper ordi
Court. (UST) Taxe
procedural remedy and nan
s)
applicable time periods for ce
challenging the ordinance?
(4%)
"Mr. A, a citizen and
resident of the Philippines,
Sour
is a professional boxer. In a
ces
professional boxing match
of
held in 2013, he won prize Gros
Yes. Under the Tax Code, the income within and without of a resident citizen is Income inco
money in United States (US) s
7 taxable. Since Mr. A is a resident Filipino citizen, his income worldwide is Taxatio me 2015
dollars equivalent to Inco
taxable in the Philippines. (UST) n subj
P300,000,000."a) Is the me
ect
prize money paid to and
to
received by Mr. A in the US
tax
taxable in the Philippines?
Why? (2%)
"Mr. A, a citizen and Excl
No. Under the law, all prizes and awards granted to athletes in local
resident of the Philippines, usio
and international sports competitions whether held in the Philippines or Gros
is a professional boxer. Income ns
abroad and sanctioned by their national sports association are excluded from s
8 In a professional boxing Taxatio fro 2015
gross income. However, in this case, there is no showing that the Inco
match held in 2013, he won n m
boxing match was sanctioned by the Philippine National Sports Commission. me
prize money in Gro
Therefore, the prize money is not excluded. (UST)
United States (US) dollars ss
 equivalent to Inco
P300,000,000." me

b) May Mr. A's prize money

qualify as an exclusion from
his gross
income? Why? (2%)
Taxa
"Mr. A, a citizen and
tion
resident of the Philippines,
of
is a professional boxer.
resi
In a professional boxing
den
match held in 2013, he won
t
prize money in
citiz
United States (US) dollars
ens,
equivalent to
non
P300,000,000." Gros
Mr. A may avail of tax credit against his tax liability in the Philippines Income -
s
9 for taxes paid in foreign countries. He has to signify in his income tax return Taxatio resi 2015
c) The US already imposed Inco
his desire to avail the deduction. (UST) n den
and withheld income taxes me
t
from Mr. A's
citiz
prize money. How may Mr.
ens,
A use or apply the income
and
taxes he paid on his prize
resi
money to the US when he
den
computes his income tax
t
liability in the Philippines
alie
for 2013? (4%)
ns
Ms. C, a resident citizen,
Yes, the income of Ms. B from the sale of ready-to-wear goods to Ms. C
bought ready-to-wear Gros Situ
is taxable. A nonresident citizen is taxable only on income derived from Income
1 goods from Ms. B, a non- s s of
sources within the Philippines. In line with the source rule of income Taxatio 2015
0 resident citizen. Inco Taxa
taxation, since the goods are produced and sold within the Philippines, n
me tion
Ms. B’s Philippine-sourced income is taxable in the Philippines. (UST)
a) If the goods were
 produced from Ms. B's
factory in the Philippines, is
Ms. B's income from the
sale to Ms. C taxable in the
Philippines? Explain. (2%)

Ms. C, a resident citizen,

bought ready-to-wear
goods from Ms. B, a non-
resident citizen.
Yes, but only a proportionate part of the income. Gains, profits and Gros Situ
b) If Ms. B is an alien Income
1 income from the sale of personal property produced by the taxpayer s s of
individual and the goods Taxatio 2015
1 were produced in her without and sold within the Philippines, shall be treated as derived partly Inco taxa
n
from sources within and partly without the Philippines. (UST) me tion
factory in China, is Ms. B's
income from the sale of the
goods to Ms. C taxable in
the Philippines? Explain.
(2%)
Mr. E and Ms. F are both
employees of AAA Corp.
They got married on
Ded
February 14, 2011. On
ucti
December 29, 2011, the
on
couple gave birth to Gros
Income fro
1 triplets. On June 25, 2013, Both Mr. E and Ms. F can claim for personal exemption up to P50,000.00. s
Taxatio m 2015
2 they had twins. What were (UST)
n
Inco
Gro
the personal me
ss
exemptions/deductions
Inco
which Mr. E and Ms. F could
me
claim in the following
taxable years:a) For 2010
(2%)
 Mr. E and Ms. F are both
employees of AAA Corp.
They got married on
February 14, 2011. On Ded
December 29, 2011, the ucti
couple gave birth to on
Either Mr. E or Ms. F can claim for additional exemption of P25,000.00 each Gros
triplets. On June 25, 2013, Income fro
1 for their children. This is in addition to the personal exemption of P50,000.00 s
they had twins. What were Taxatio m 2015
3 the personal which they can respectively claim. According to the Tax Code, only one of the Inco
n Gro
spouses can claim for additional exemption for every dependent. (UST) me
exemptions/deductions ss
which Mr. E and Ms. F could Inco
claim in the following me
taxable years:

b) For 2011 (3%)

Mr. E and Ms. F are both
employees of AAA Corp.
They got married on
February 14, 2011. On Ded
December 29, 2011, the ucti
couple gave birth to Mr. E and Ms. F can claim for personal exemptions, respectively. In addition, on
Gros
triplets. On June 25, 2013, any one of them, exclusively, can claim for the additional exemptions in Income fro
1 s
they had twins. What were relation to their four dependents amounting to P25,000.00 each. Under Taxatio m 2015
4 the personal Inco
the Tax Code, an individual may claim up to four additional exemptions n Gro
me
exemptions/deductions in connection with his/her dependents. (UST) ss
which Mr. E and Ms. F could Inco
claim in the following me
taxable years:

c) For 2013 (2%)

 BBB, Inc., a domestic
corporation, enjoyed a
particularly profitable year
in 2014. In June 2015, its
Board of Directors
approved the distribution
of cash dividends to its Gros Situ
A final withholding tax of ten percent (10%) shall be imposed upon the cash Income
1 stockholders. BBB, Inc. has s s of
dividends actually or constructively received by a resident citizen from BBB, Taxatio 2015
5 individual and corporate Inc. (UST) n
Inco taxa
stockholders. What is thf~ me tion
tax treatment of the cash
dividends received from
BBB, Inc. by the following
stockholders:

a) A resident citizen (1%)

BBB, Inc., a domestic
corporation, enjoyed a
particularly profitable year
in 2014. In June 2015, its
Board of Directors
approved the distribution
of cash dividends to its Gros Situ
A final withholding tax of twenty percent (20%) shall be imposed upon Income
1 stockholders. BBB, Inc. has s s of
the cash dividends actually or constructively received by a nonresident alien Taxatio 2015
6 individual and corporate engaged in trade or business from BBB, Inc. (UST) n
Inco taxa
stockholders. What is thf~ me tion
tax treatment of the cash
dividends received from
BBB, Inc. by the following
stockholders:b) Non-
resident alien engaged in
trade or business (1%)
 BBB, Inc., a domestic
corporation, enjoyed a
particularly profitable year
in 2014. In June 2015, its
Board of Directors
approved the distribution
of cash dividends to its
stockholders. BBB, Inc. has Gros Situ
A final withholding tax equal to twenty-five percent (25%) of the entire Income
1 individual and corporate s s of
income received from all sources within the Philippines, including the cash Taxatio 2015
7 stockholders. What is thf~ dividends received from BBB, Inc. (UST) n
Inco taxa
tax treatment of the cash me tion
dividends received from
BBB, Inc. by the following
stockholders:

c) Non-resident alien not

engaged in trade or busines
(1%)
BBB, Inc., a domestic
corporation, enjoyed a
particularly profitable year
in 2014. In June 2015, its
Board of Directors
approved the distribution
Gros Situ
of cash dividends to its Income
1 Dividends received by a domestic corporation from another corporation, s s of
stockholders. BBB, Inc. has Taxatio 2015
8 such as BBB, Inc., shall not be subject to tax. (UST) Inco taxa
individual and corporate n
me tion
stockholders. What is thf~
tax treatment of the cash
dividends received from
BBB, Inc. by the following
stockholders:
 d) Domestic corporation
(1%)

BBB, Inc., a domestic

corporation, enjoyed a
particularly profitable year
in 2014. In June 2015, its
Board of Directors
A final withholding tax of fifteen percent (15%) is imposed on the amount of
approved the distribution
cash dividends received from BBB, Inc., subject to the tax sparing credit
of cash dividends to its
provision (Section 28(B)(5)(b), NIRC). The application of the tax sparing Gros Situ
stockholders. BBB, Inc. has Income
1 credit is that the country-domicile of the recipient corporation allows a s s of
individual and corporate Taxatio 2015
9 stockholders. What is thf~ credit against the tax due from the non-resident foreign corporation. Inco taxa
n
Otherwise, the applicable tax rate is thirty percent (30%) of the gross me tion
tax treatment of the cash
income received during each taxable year from all sources within the
dividends received from
Philippines. (UST)
BBB, Inc. by the following
stockholders:

e) Non-resident foreign
corporation (1%)
Indicate whether each
ofthe following individuals
is required or not required
Income Inco
2 to file an income tax return: No, because a non-resident Filipino citizen is taxable only in income Inco
Taxatio me 2015
0 sourced within the Philippines. (UST) me
n Tax
a) Filipino citizen residing
outside the Philippines on
his income from sources
 outside the Philippines.
(1%)

Indicate whether each

ofthe following individuals
is required or not required
Income Inco
2 to file an income tax Yes because a resident alien is taxable for income derived from sources within Inco
Taxatio me 2015
1 return:b) Resident alien on the Philippines. (UST)
n Tax
me
income derived from
sources within the
Philippines. (1%)
Indicate whether each
ofthe following individuals
is required or not required
to file an income tax return:
Yes. A resident citizen who is earning purely compensation income from two Income Inco
2 c) Resident citizen earning Inco
employers should file income tax return for not being qualified for substituted Taxatio me 2015
2 purely compensation filing. (UST) n Tax
me
income from two
employers within the
Philippines, whose income
taxes have been correctly
withheld. (1%)
Indicate whether each
ofthe following individuals
is required or not required
to file an income tax return: Income Inco
2 No. Underthe law, all minimum wage earners in the private and public sector Inco
Taxatio me 2015
3 d) Resident citizen who falls shall be exempt from payment of income tax. (UST) me
n Tax
under the classification of
minimum wage earners.
(1%)
 Mr. H decided to sell the
house and lot wherein he
Taxa
and his family have lived for
tion
the past 10 years, hoping to
of
buy and move to a new
Mr. H may avail the exemption from capital gains tax on sale of principal resid
house and lot closer to his
residence by natural persons. Under the law, the following are the requisites: ent
children's school.
(1) proceeds of the sale of the principal residence have been fully utilized in citiz Taxa
Concerned about the
acquiring or constructing new principal residence within eighteen (18) ens, tion
capital gains tax that will be
calendar months from the date of sale or disposition; Income non- of
2 due on the sale oftheir
(2) The historical cost or adjusted basis of the real property sold or disposed Taxatio resid capi 2015
4 house, Mr. H approaches
will be carried over to the new principal residence built or acquired; n ent tal
you as a friend for advice if
(3) The Commissioner has been duly notified, through a prescribed return, citiz gain
it is possible for the sale
within thirty (30) days from the date of sale or disposition of the person’s ens, s
oftheir house to be
intention to avail of the tax exemption; and and
exempted from capital
(4) Exemption was availed only once every ten (10) years. (UST) resid
gains tax and the conditions
ent
they must comply with to
alien
avail themselves of said
s
exemption. How will you
respond? (4%)
KKK Corp. secured its
Certificate of Incorporation
from the Securities and
Exchange Commission on Taxa
June 3, 2013. It commenced tion
As Ms. J’s supervisor, I will advise that KKK Corp. should prepare
business operations on of
payment for the regular corporate income tax. Under the Tax Code, Income Tax
2 August 12, 2013. In April dom
Minimum Corporate Income Tax (MCIT) is applicable beginning on the fourth Taxatio pay 2015
5 2014, Ms. J, an employee of estic
taxable year following the commencement of operation. Thus, in this case, n able
KKK Corp. in charge corp
KKK Corp. will only apply MCIT starting taxable year 2017. (UST)
ofpreparing the annual orati
income tax return ofthe ons
corporation for 2013, got
confused on whether she
should prepare· payment
 for the regular corporate
income tax or the minimum
corporate income tax.a) As
Ms. J's supervisor, what will
be your advice? (2%)

KKK Corp. secured its

Certificate of Incorporation
from the Securities and
Exchange Commission on
June 3, 2013. It commenced
Distinction as to taxpayer: Regular corporate income tax applies to all
business operations on
corporate taxpayers; while minimum corporate income tax applies to
August 12, 2013. In April
domestic corporations and resident foreign corporations.
2014, Ms. J, an employee of Taxa
Distinction as to rate: Regular income tax is 30%; while minimum corporate
KKK Corp. in charge tion
income tax is 2%.
ofpreparing the annual of
Distinction as to tax base: Regular corporate income tax is based on the Income Tax
2 income tax return ofthe dom
net taxable income, except nonresident foreign corporation which is Taxatio pay 2015
6 corporation for 2013, got based on gross income; while minimum corporate income tax is based on n
estic
able
confused on whether she corp
gross income.
should prepare· payment orati
Distinction as to period of applicability: Regular corporate incometax is
for the regular corporate ons
applicable once the corporation commenced its operation, while MCIT is
income tax or the minimum
applicable beginning the fourth taxable year following the commencement
corporate income tax.
of operation. (UST)
b) What are the distinctions
between regular corporate
income tax and minimum
corporate income tax? (3%)
 In 2012, Dr. K decided to
return to his hometown to
start his own practice. At
the end of 2012, Dr. K
found that he earned gross
professional income in the
amount of Pl,000,000.00;
Ded
while he incurred expenses
ucti
amounting to P560,000.00
Dr. K may opt to use the optional standard deduction (OSD) in lieu of on
constituting mostly of his Gros
the itemized deduction. OSD is a maximum of forty percent (40%) of Income fro
2 office space rent, utilities, s
gross receipts during the taxable year. Proof of actual expenses is not Taxatio m 2015
7 and miscellaneous Inco
required, but Dr. K shall keep such records pertaining to his gross receipts. n Gro
expenses related to his me
(UST) ss
medical practice. However,
Inco
to Dr. K's dismay, only
me
P320,000.00 of his
expenses were duly
covered by receipts. What
are the options available for
Dr. K so he could maximize
the deductions from his
gross income? (3%)
Mr. L owned several parcels
of land and he donated a
Valu
parcel each to his two Valu
The valuation of Mr. L’s gift to his children is the fair market value (FMV) of atio
children. Mr. L acquired ation
the property at the time of donation. It is the higher of the FMV as n of
both parcels of land in 1975 of
determined by the Commissioner or the FMV as shown in the schedule of gifts
2 for ll200,000.00. At the Donor’s gifts
values fixed by the provincial or city assessors. In this case, for the purpose of mad 2015
8 time of donation, the fair Tax mad
computing donor’s tax, the proper valuation is the value prepared by the City e in
market value of the two e in
Assessors amounting to P2,500,00.00 because it is higher than the FMV pro
parcels of land, as prop
determined by the CIR. (UST) pert
determined by the CIR, was erty
y
112,300,000.00; while the
fair market value ofthe
 same properties as shown
in the schedule of values
prepared by the City
Assessors was
112,500,000.00. What is
the proper valuation of Mr.
L's gifts to his children for
purposes of computing
donor's tax? (3%)
In order that the claims against the estate may be deducted, the following are
Clai
the requisites:
ms
1.The liability represents a personal obligation of the deceased existing at the
State the conditions for agai
time of his death except unpaid obligations incurred incident to his death such
allowing the following as nst
as unpaid funeral expenses and unpaid medical expenses;
deductions from the gross Ded esta
2.The liability was contracted in good faith and for adequate and full
estate of a citizen or uctio te:
consideration in money or money’s worth;
2 resident alien for the Estate ns Req
3.The claim must be a debt or claim which is valid in law and enforceable in 2015
9 purpose o f imposing estate court;
Tax from uisit
tax: Estat es
4.The indebtedness must not have been condoned by the creditor or the
e for
action to collect from the decedent must not have prescribed.
a. Claims against the estate ded
At the time the indebtedness was incurred, the debt instrument was duly
(2%) ucti
notarized and if the loan was contracted within three (3) years before the
bilit
death of the decedent, the administrator or executor shall submit a statement
y
showing the disposition of the proceeds of the loan. (UST)
Med
State the conditions for
ical
allowing the following as
Ded exp
deductions from the gross
All medical expenses incurred within one (1) year before the death of the uctio ens
estate of a citizen or
3 decedent which are duly substantiated with receipts, provided that the Estate ns es:
resident alien for the 2015
0 purpose o f imposing estate totalamount thereof, whether paid or unpaid, does not exceed Five Hundred Tax from Req
Pesos (P500,000.00). (UST) Estat uisit
tax:
e es
for
b. Medical expenses (2%)
ded
 ucti
bilit
y

Clai
In order that the claims against the estate may be deducted, the following are ms
the requisites:1.The liability represents a personal obligation of the deceased agai
State the conditions for existing at the time of his death except unpaid obligations incurred incident to nst
allowing the following as his death such as unpaid funeral expenses and unpaid medical expenses;2.The Ded esta
deductions from the gross liability was contracted in good faith and for adequate and full consideration uctio te:
3 estate of a citizen or in money or money’s worth;3.The claim must be a debt or claim which is valid Estate ns Req
2015
1 resident alien for the in law and enforceable in court;4.The indebtedness must not have been Tax from uisit
purpose o f imposing estate condoned by the creditor or the action to collect from the decedent must not Estat es
tax:a. Claims against the have prescribed.At the time the indebtedness was incurred, the debt e for
estate (2%) instrument was duly notarized and if the loan was contracted within three (3) ded
years before the death of the decedent, the administrator or executor shall ucti
submit a statement showing the disposition of the proceeds of the loan. (UST) bilit
y
Med
ical
State the conditions for exp
allowing the following as ens
Ded
deductions from the gross es:
All medical expenses incurred within one (1) year before the death of the uctio
estate of a citizen or Req
3 decedent which are duly substantiated with receipts, provided that the Estate ns
resident alien for the uisit 2015
2 totalamount thereof, whether paid or unpaid, does not exceed Five Hundred Tax from
purpose o f imposing estate es
Pesos (P500,000.00). (UST) Estat
tax: for
e
ded
b. Medical expenses (2%) ucti
bilit
y
 In order that the claims against the estate may be deducted, the following are
Clai
the requisites:
ms
1.The liability represents a personal obligation of the deceased existing at the
State the conditions for agai
time of his death except unpaid obligations incurred incident to his death such
allowing the following as nst
as unpaid funeral expenses and unpaid medical expenses;
deductions from the gross Ded esta
2.The liability was contracted in good faith and for adequate and full
estate of a citizen or uctio te:
consideration in money or money’s worth;
3 resident alien for the Estate ns Req
3.The claim must be a debt or claim which is valid in law and enforceable in 2015
3 purpose o f imposing estate court;
Tax from uisit
tax: Estat es
4.The indebtedness must not have been condoned by the creditor or the
e for
action to collect from the decedent must not have prescribed.
a. Claims against the estate ded
At the time the indebtedness was incurred, the debt instrument was duly
(2%) ucti
notarized and if the loan was contracted within three (3) years before the
bilit
death of the decedent, the administrator or executor shall submit a statement
y
showing the disposition of the proceeds of the loan. (UST)
Med
ical
exp
State the conditions for
ens
allowing the following as Ded
es:
deductions from the gross All medical expenses incurred within one (1) year before the death of the uctio
Req
3 estate of a citizen or decedent which are duly substantiated with receipts, provided that the Estate ns
uisit 2015
4 resident alien for the totalamount thereof, whether paid or unpaid, does not exceed Five Hundred Tax from
es
purpose o f imposing estate Pesos (P500,000.00). (UST) Estat
for
tax:b. Medical expenses e
ded
(2%)
ucti
bilit
y
 In order that the claims against the estate may be deducted, the following are
Clai
the requisites:
ms
1.The liability represents a personal obligation of the deceased existing at the
State the conditions for agai
time of his death except unpaid obligations incurred incident to his death such
allowing the following as nst
as unpaid funeral expenses and unpaid medical expenses;
deductions from the gross Ded esta
2.The liability was contracted in good faith and for adequate and full
estate of a citizen or uctio te:
consideration in money or money’s worth;
3 resident alien for the Estate ns Req
3.The claim must be a debt or claim which is valid in law and enforceable in 2015
5 purpose o f imposing estate court;
Tax from uisit
tax: Estat es
4.The indebtedness must not have been condoned by the creditor or the
e for
action to collect from the decedent must not have prescribed.
a. Claims against the estate ded
At the time the indebtedness was incurred, the debt instrument was duly
(2%) ucti
notarized and if the loan was contracted within three (3) years before the
bilit
death of the decedent, the administrator or executor shall submit a statement
y
showing the disposition of the proceeds of the loan. (UST)
Med
ical
State the conditions for exp
allowing the following as ens
Ded
deductions from the gross es:
All medical expenses incurred within one (1) year before the death of the uctio
estate of a citizen or Req
3 decedent which are duly substantiated with receipts, provided that the Estate ns
resident alien for the uisit 2015
6 purpose o f imposing estate totalamount thereof, whether paid or unpaid, does not exceed Five Hundred Tax from
es
Pesos (P500,000.00). (UST) Estat
tax: for
e
ded
b. Medical expenses (2%) ucti
bilit
y
 Fisc
al
ade
qua
cy,
The principles of a sound tax system are the following:
Princ adm
a.Fiscal adequacy which means that the sources of revenue should be
General iples inist
sufficient to meet the demands of public expenditures;
Principl of rativ
3 Explain the principles of a b.Equality or theoretical justice which means that the tax burden should be
es of Soun e 2015
7 sound tax system. (3%) proportionate to the taxpayer’s ability to pay (this is the so-called ability to
Taxatio d tax feas
pay principle); and
n syste ibilit
c.Administrative feasibility which means that the tax law should be
m y,
capable of convenience, just and effective administration. (UST)
the
oret
ical
justi
ce
Double taxation in the strict sense pertains to the direct double
Differentiate between taxation. This means that the taxpayer is taxed twice by the same taxing General Doct
Dou
double taxation in the strict authority, within the same taxing jurisdiction, for the same property and Principl rines
3 ble
sense and in a broad sense same purpose.On the other hand, double taxation in broad sense es of in 2015
8 and give an example taxa
pertains to indirect double taxation. This extends to all cases in which there Taxatio Taxa
tion
ofeach. (4%) is a burden of two or more impositions. It is the double taxation other than n tion
those covered by direct double taxation. (UST)
 The following shall be considered as “de minimis” benefits:

1.Monetized unused vacation leave credits of private employees not exceeding 10

days during the year;
2.Monetized unused vacation and sick leave credits paid to government officials
and employees, regardless of the number of days;
3.Medical cash allowance to dependents of employees, not exceeding P750 per
employee per semester or P125 per month; Exe
4.Rice subsidy of P1,500 or one (1) sack of 50 kg. rice per month amounting to mpt
not more than P1,500; ion
5.Uniform and clothing allowance not exceeding P5,000 per annum; fro
6.Actual medical assistance not exceeding P10,000 per annum; General Doct
m
7.Laundry allowance not exceeding P300 per month; Principl rines
3 Give three (3) examples of taxa
8.Employees achievement awards, e.g., for length of service or safety achievement, es of in 2015
9 de minimis benefits. (4%) which must be in the form of a tangible personal property other than cash or Taxatio Taxa
tion
gift certificate, with an annual monetary value not exceeding P10,000 received by : De
n tion
the employee under an established written plan which does not discriminate in mini
favor of highly paid employees; mis
9.Gifts given during Christmas and major anniversary celebrations not exceeding ben
P50,000 per employee per annum; efits
10.Daily meal allowance for overtime work and night/graveyard shift not
exceeding 25% of the basic minimum wage on a per region basis;
11.Benefits received by an employee by virtue of a collective bargaining
agreement (CBA) and productivity incentive schemes provided that the total annual
monetary value received from both CBA and productivity incentive schemes
combined do not exceed ten thousand pesos (P10,000.00) per employee per
taxable year. (UST)
 De minimis benefits are facilities, and privileges furnished or offered by Exe
an employer to his employees, which are not considered as mpt
compensation subject to income tax and consequently to withholding tax, ion
if such facilities or privileges are of relatively small value and are offered or fro
General Doct
furnished by the employer merely as means of promoting the health, m
What are de minimis Principl rines
4 goodwill, contentment, or efficiency of his employees.The excess over the taxa
benefits and how are these es of in 2015
0 taxed? de minimis limit prescribed shall be considered, along with the “other tion
Taxatio Taxa
benefits” under Section 32(B)(7)(e)(iv), NIRC, in determining whether or not : De
n tion
the P82,000 threshold has been exceeded. Any excess over the de minimis mini
ceiling may be exempt if itis covered by the unused portion of the mis
P82,000.00 non-taxable “other benefits”. Otherwise, any amount in ben
excess of the P82,000.00 threshold becomes subject to tax. (UST) efits
Life
bloo
The following doctrines, explained:
d
The
Lifeblood doctrine - Without revenue raised from taxation, the government
ory;
will not survive, resulting in detriment to society. Without taxes, the
Nec
government would be paralyzed for lack of motive power to activate and
cess
Briefly explain the operate it (CIR v. Algue, Inc. 158 SCRA 9 [1988])
ity
following doctrines: Necessity theory - The exercise of the power to tax emanates from necessity,
General Doct The
lifeblood doctrine; because without taxes, government cannot fulfill its mandate of promoting
Principl rines ory;
necessity theory; the general welfare and well being of the people (CIR v. Bank of the Philippine
1 es of in Ben 2016
benefits received Islands, 521 SCRA 373 [2007])
principle; and, doctrine
Taxatio Taxa efits
Benefits received principle - Taxpayers receive benefits from taxes through the
of symbiotic n tion Rec
protection the State affords to them. For the protection they get arises their
relationship. (5%) eive
obligation to support the government through payment of taxes (CIR v. Algue,
d
Inc, 158 SCRA 9 [1988])
Prin
Doctrine of symbiotic relationship - Taxation arises because of the reciprocal
cipl
relation of protection and support between the state and taxpayers. The state
e;
gives protection and for it to continue giving protection, it must be supported
and
by the taxpayers in the form of taxes (CIR v. Algue, Inc. 15 SCRA 9 [1988]).
Doc
trin
e of
Sym
bioti
c
Rela
tion
ship
 The following cases are under the exclusive appellate hurisdiction of the Court
of Tax Appeals.A. Exclusive appellate jurisdiction to review by appeal:1.
Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising under the NIRC or other
laws administered by the BIR;2. Inaction of the Commisioner of Internal
Revenue in cases involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties in relation thereto, or other matters
arising under the NIRC or other laws administered by the BIR, where the NIRC
provides a specific period of action, in which case the inaction shall be
deemed a denial;3. Decisions, orders or resolutions of the RTC in local tax
cases originally decided or resolved by them in the exercise of their original or
appellate jurisdiction;4. Decisions of the Commissioner of Customs in cases
Excl
involving liability of customs duties, fees or other money charges, seizure,
usiv
State at least five (5) detention or release of property affected, fines, forfeituresor other penalties
Cour e
cases under the in relation thereto, or other matters arising under the Customs Law or other
Tax t of App
exclusiveappellate laws administered by the Bureau of Customs; and5. Decisions of the Central
2 Remedi Tax ellat 2016
jurisdiction of the Court Board of Assessment Appeals in th eexercise of its appellate jurisdiction over
of Tax Appeals (CTA).
es App e
cases involving the assessment and taxation of real property originally decided
(5%) eals Juris
by the provincial or city board of assessment appeals.6. Desicions of the
dicti
Secretary of Finance on customs cases elevated to him automatically for
on
review from decisions of the Commissioner of Customs adverse to the
Government under Sec. 2315 of the Tariff and Customs Code; and7. Decisions
of the Secretary of Trade and Industry, in the case of nonagricultural product,
commodity or article, and the Secretary of Agriculture, in th ecase of
agricultural product, commodity or article, involving dumping and
countervailing duties under Sec. 301 and 302, respectively, of the Tariff and
Customs Code, and safeguard measures under R.A. No. 8800, where either
party may appeal the decision to impose or not impose said duties.B. Exclusive
appellate jurisdiction in criminal offenses:1. Over appeals from the judgments,
resolutions or orders of the Regional Trial Courts in tax cases originally
decided by them, in their respective territorial jurisdictaion; and2. Over
petitions for review of the judgments, resolutions or orders of the Regional
Trial Courts in the exercise of their appellate jurisdiction over tax cases
originallydecided by the appellate Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in their respective jurisdiction.(NOTE:
It is recommended that any five (5) of the above-enumerated cases be given
credit)
 Rakham operates the
lending company that
made a loan to Alfonso I will advise Rakham that the obligation of Alfonso may now be considered as
in the amount of bad debts for having met the yardstick of a debt which had become worthless.
Pl20,000.00 subject of a
In oreder to be considered worthless, the taxpayer should establish that
promissory note which is
due within one (1) year during the year from which a deduction is sought, a situation developed as a
from the note's reult of which it became evident in the exercise of sound, objective business Allo
issuance. Three years judgment that there remained no practical, but only vague theoretical, wabl
Income Bad
after the loan became prospect that the debt would ever be paid [Collector of Internal Revenue v. e
3 Taxatio Deb 2016
due and upon Goodrich International Rubber Co., 21 SCRA 1336 (1967)]. A bad debt is Ded
information that Alfonso
n t
deductible if it complies with the following requisites:a. There must be a valid uctio
is nowhere to befound, and subsisting debt.b. The obligation is connected with the taxpayer's trade or ns
Rakham asks you for business and is not between related parties.c. There is an actual
advice on how to treat
acsertainment that the debt is worthless.d. The debt is charged-off during the
the obligation as "bad
debt." Discuss the
taxable year. A partial write-off is not allowed (PRC v. CA, 256 SCRA 667
requisites for [1996).
deductibility of a "bad
debt?" (5%)
The City of Maharlika
passed an ordinance
imposing a tax on any
sale or transfer of real
I would argue that the City is allowed to levy a tax on transfer of real property
property located within
the city at a rate of fifty ownership (Sec. 135, LGC). The capital gains tax which is an income tax
percent (50%) of one collected by the national governemnt is entirely different form the tax on sale Sale
Local
percent (1%) of the or transfer imposed by the ordinance. The tax imposed by th eordinance not Capit of
Govern
total consideration of being in the nature of an income tax, the imposition of the income taxby the al real
4 ment 2016
the transaction. Jose national governemnt will not pre-empt the tax sought to be imposed by the Gain pro
sold a parcel of land in
Taxatio
ordinance. I would further argue that the imposition by the national s Tax pert
the city, which he n
governemnt of a tax will pre-empt Local Government Units (LGU) only if there y
inherited from his is no specific provision under the Local Governemnet Code giving said power
deceased parents, and
(Bulacan v. CA, 299 SCRA 442 [1998]).
refused to pay the
aforesaid tax. He
instead filed a case
asking that the
ordinance be declared
null and void since the
tax it imposed can only
be collected by the
national government, as
in fact he has paid the
Bureau of Internal
Revenue (BIR) the
required capital gains
tax. If you were the City
Legal Officer of
Maharlika, what
defenses would you
raise to sustain the
validity of the
ordinance? (5%)
 Sure Arrival Airways
(SAA) is a foreign
corporation, organized
under the laws of the
Republic of Nigeria. Its
commercial airplanes do
not operate within
Philippine territory, or
service passengers
embarking from
Philippine airports. The
firm is represented in
the Philippines by its
general agent,
Narotel.SAA sells Princ Prin
airplane tickets through No. The activity which gives rise to the income is the sale of ticket in the
iple cipl
Narotel, and these Philippines, hence, the income from sale of tickets is an income derived from
General of e of
tickets are serviced by Philippine sources which is subject to the Philippine income tax. Accordingly,
Principl Terri Terr
SAA airplanes outside there is no violation of the principle of territoriality in taxation (Air Canada v.
5 es of toria itori 2016
the Philippines. The total CIR, 778 SCRA 131, [2016])[Note: As the case which is the basis of the answer
sales of airplane tickets
Taxatio lity ality
was decided beofre the cut-off date for the 2016 Bar Examinations, it is
transacted by Narotel n in in
recommended that this question be considered a bonus question, with any
for SAA in 2012 Taxa Taxa
answer to be given full credit].
amounted to tion tion
Pl0,000,000.00. The
Commissioner of
Internal Revenue (CIR)
assessed SAA deficiency
income taxes at the rate
of 30% on its taxable
income, finding that
SAA's airline ticket sales
constituted income
derived from sources
within the
Philippines.SAA filed a
protest on the ground
that the alleged
 deficiency income taxes
should be considered as
income derived
exclusively from sources
outside the Philippines
since SAA only serviced
passengers outside
Philippine territory. It,
thus, asserted that the
imposition of such
income taxes violated
the principle of
territoriality in
taxation.Is the theory of
SAA tenable? Explain.
(5%)

Mapagbigay Corporation
grants all its employees
(rank and file, No. The courtesy dicounts given to rank and file employees are considered "de
supervisors, and minimis benefits" falling under the category of other facilities and privileges
managers) 5% discount furnished or offered by an employer to his employees which are of relatively Allo
of the purchase price of De
small value intended to promote the health, goodwill, contentment or wabl
its products. During an Income mini
efficiency of the employee. These benfitsare not considered as compensation e
6 audit investigation, the Taxatio mis 2016
subject to income tax and consequently to th ewitholding tax (Sec. 2.78.1 of Ded
BIR assessed the n Ben
company the RR No. 10-2008). If these "de minimis benefits" are furnished to supervisors uctio
efits
corresponding tax on and managers, the same are also exempt from the fringe benefits tax (RRNo. ns
the amount equivalent 3-98;Sec. 33, NIRC).
to the courtesy discount
received by all the
employees, contending
that the courtesy
discount is considered
as additional
compensation for the
rank and file employees
and additional fringe
benefit for the
supervisors and
managers. In its
defense, the company
argues that the discount
given to the rank and
file employees is a de
minimis benefit and not
subject to tax. As to its
managerial employees,
it contends that the
discount is nothing more
than a privilege and its
availment is restricted.

Is the BIR assessment

correct? Explain. (5%)
 Philippine National
Railways (PNR) operates
the rail transport of
passengers and goods
by providing train
stations and freight
customer facilities from
Tutuban, Manila to the
Bicol Province. As the
operator of the railroad
transit, PNR administers
the land, improvements
and equipment within its
main station in Tutuban,
Manila.Invoking Section
193 of the Local Yes. The properties of PNR are properties of public dominion owned by the
Government Code (LGC) Republic of the Philippines, which are exempt from real property tax (Sec, 234,
Local Real
expressly withdrawing LGC). In Manila International Airport Authority v. CA (495 SCRA 591, [2006]), Tax
Govern Pro
the tax exemption the Supreme Court held that MIAA is a government instrumentality and is not Exe
7 ment pert 2016
privileges of a government-owned or controlled corporation, therfore the real properties mpti
government-owned and
Taxatio y
owned by MIAA are not subject to real estate tax, except when MIAA leases its ons
controlled corporations n Tax
real property to private parties. IN the said case, PNR was cited as an example
upon the effectivity of of such government instrumentality which is deemed exempt.
the Code in 1992, the
City Government of
Manila issued Final
Notices of Real Estate
Tax Deficiency in the
amount of
P624,000,000.00 for the
taxable years 2006 to
2010. On the other
hand, PNR, seeking
refuge under the
principle that the
government cannot tax
itself, insisted that the
PNR lands and buildings
are owned by the
Republic.Is the PNR
exempt from real
property tax? Explain
your answer. (5%)
 In 2011, Solar Computer
Corporation (Solar)
purchased a proprietary
membership share
covered by Membership
Certificate No. 8 from
the Mabuhay Golf Club,
Inc. for P500,000.00. On
December 27, 2012, it No. The transfer is not a taxable donation because there is no divestment of
transferred the same to ownership by the transferor. The purpose of the transfer is simply to allow
David, its American David to avail of the facilities of the Club. The execution of a "Deed of
consultant, to enable
Declaration of Trust and Assignment of Shares" where the absolute ownership
him to avail of the
by Solar of the share is acknowledged would show that there is no
facilities of the Club.
David executed a Deed relinquishment of ownership by Solar. The transfer being merely a transfer in
of Declaration of Trust form but not in substance, the same is not subject to gift tax.
and Assignment of
Donor's "gift "gift
8 Shares wherein he Alternative Answer: 2016
Tax tax" tax"
acknowledged the
absolute ownership of The assignment is a "gift" subject to gift tax. The absence of donative intent
Solar over the share; does not exempt the sales of stock transaction from donor's tax since Sec. 100
that the assignment was of the NIRC categorically states that the amount by which the fair market
without any
value of the property exceeded that value of the consideration shall be
consideration; and that
the share was placed in deemed a gift. Thus, even if there is no actual donation, the difference in price
his name because the is considered a donation by fiction of law (Philam Life and General Insurance
Club required it to be Co. v. Sec. of Finance and CIR, 741 SCRA 579 [2014]).
done. In 2013, the value
of the share increased to
P800,000.00.

Is the said assignment a

"gift" and, therefore,
subject to gift tax?
Explain. (5%)
 Proc
Proc
edu
edur
In order to be entitled to a refund/tax credit of excess input VAT attributable re
e on
to zero-rated or effectively zero-rated sales, the following requisites must be on
Explain the procedure how
complied with:1. The claim for refund must be filed with the Comissioner how
for claiming refunds or to
tax credits of input within 2 years counted from the last day of the quarter when the sero-rated to
clai
Value Added Tax (VAT) sale was made (Sec. 112, NIRC);2. The claim for refund must be accompanied clai
m
for zero-rated or by a statement under oath that all documents to support the claim has been m
Value- refu
effectively zero-rated submitted at the time of filig of the claim for refund (RMC 54-14);3. The refu
9 Added nd/t 2016
sales under Sec. 112 of Comissioner must decide on the claim within 120 days from date of filing and nd/t
the National Internal
Tax ax
the adverse decision is appealable to the CTAwithin 30 days from receipt (Sec. ax
Revenue Code (NIRC) credi
112, NIRC, CIR v. Aichi Forging of Asia, Inc., 632 SCRA 422 [2010]).4. If no cred
from the filing of an t of
decision is made within the 120-day period, there is a deemed denial or it of
application with the CIR exce
adverse decision which is appealable to the CTA within 30 days from the lapse exce
up to the CTA. (2.5%) ss
of the 120-day period (Sec. 112, NIRC; Sec. 7(a)(1), RA 1125 as amended by RA ss
inpu
9289); inpu
t
t
VAT
VAT
Proc
Proc
edu
edur
re
The procuder for claiming refunds of tax erroneously or illegally collected are e for
for
Explain the procedure
the following: clai
clai
for claiming refunds of 1. A written claim for refund must be filed with the Commissioner within two ming
min
tax erroneously or years from date of payment of the tax (Sec. 204, NIRC) refu
g
1 illegally collected under
2. A decision of the Commissioner denying the claim, is appealable to the CTA Tax nds
refu
Sec. 229 of the NIRC within 30 days from receipt therof or within two years from date of payment, Remedi of 2016
0 from the filing of the nds
whichever comes first (Sec. 229, NIRC; Sec. 7(a)(1), RA 1125 as amenden by RA es tax
claim for refunds with of
9282); erro
the CIR up to the CTA. tax
3. If no decission is made by the COmmissioner, the aggrieved taxpayer msut neou
(2.5%) erro
consider the inaction as a denial and appeal to the CTA must be filed before sly
neo
the lapse of two years counted from date of payment (Sec. 229, NIRC) or
usly
iileg
or
ally
iileg
 colle ally
cted coll
ecte
d

Congress issued a law

allowing a 20% discount
on the purchases of
senior citizens from,
among others,
recreation centers. This
20% discount can then
be used by the sellers as
a "tax credit." At the
The effect of coverting the 20% discount from a "tax credit" to a "tax
initiative of BIR, 20%
however, Republic Act deduction" is that the tax benefit enjoyed by sellers of goods and services to
Seni
No. (RA) 9257 was senior citizens is effectively reduced. A tax credit reduces the tax liability while General
or
1 enacted amending the
a tax deduction merely reduces the tax base. Principl Tax
Citiz
treatment of the 20% es of Cred 2016
1 discount as a "tax en
Under the tax credit scheme, the establishments are paid back 100% of the Taxatio it
deduction." Equity Disc
discount they give to senior citizens while under the tax deduction scheme, n
Cinema filed a petition oun
they are only paid back about 32% of the 20% discount granted to senior
with the RTC claiming t
citizens.
that RA 9257 is
unconstitutional as it
forcibly deprives sellers
a part of the price
without just
compensation.

[a] What is the effect of

converting the 20%
 discount from a "tax
credit" to a "tax
deduction"? (2.5%)

Congress issued a law

allowing a 20% discount
on the purchases of
senior citizens from,
among others,
recreation centers. This
20% discount can then
be used by the sellers as
a "tax credit." At the
initiative of BIR, 20%
however, Republic Act Seni
General
No. (RA) 9257 was I will decide in favor of the Constitutionality of the law. The 20% discount as or
Principl Tax
1 enacted amending the well as the tax deduction sheme is a valid exercise of the police power of the Citiz
es of Cred 2016
2 treatment of the 20% State (Manila Park Inc. v. Department of Social Welfare and Development, 711
Taxatio it
en
discount as a "tax SCRA 302 [2013]). Disc
deduction." Equity n
oun
Cinema filed a petition t
with the RTC claiming
that RA 9257 is
unconstitutional as it
forcibly deprives sellers
a part of the price
without just
compensation.b] If you
are the judge, how will
you decide the case?
 Briefly explain your
answer. (2.5%)

Soaring Eagle paid its

excise tax liabilities with
Tax Credit Certificates
(TCCs) which it
purchased through the
One Stop Shop Inter-
Agency Tax Credit
Center (Center) of the
Department of Finance. No. The assessment is invalid because the TCC's used by Soaring Eagle are
The Center is a valid and effective. A TCC is a n undertaking by the government through the
composite body of the BIR or DOF, acknowledging that a taxpayer is entitled to a certain amount of
DOF, BIR, BOC and the tax credit from either an overpayment of income taxes, a direct benefit Tax Asse Asse
1 BOI. The TCCs ~ere
granted by law or other sources and instances granted by law such as on Remedi ssme ssm 2016
3 accepted by the BIR as specific unused input taxes and excise taxes on certain goods. As such, tax es nt ent
payments. A year after,
the BIR demanded the credit is transferable in accordance with pertinent laws, rules, and regulations
payment of alleged (Pilipinas Shell Petroleum Corp. v. Commissioner of INternal Revenue, 541
deficiency excise taxes SCRA 316 [2007]).
on the ground that
Soaring Eagle is not a
qualified transferee of
the TCCs it purchased
from other BOI-
registered companies.
The BIR argued that the
TCCs are subject to
 post-audit as a
suspensive condition. On
the other hand, Soaring
Eagle countered that it
is a buyer in good faith
and for value who
merely relied on the
Center's representation
of the genuineness and
validity of the TCCs. If it
is ordered to pay the
deficiency, Soaring
Eagle claims the same is
confiscatory and a
violation of due process.
Is the assessment
against Soaring Eagle
valid? Explain. (5%)
The Philippine-British
Association, Inc.
(Association) is a non-
stock, non-profit Spe
organization which owns cial
the St. Michael's No. The Medical Arts Center is an integral part of the Hospital and should be Clas
Hospital (Hospital). Sec. classified for assessmnet purposes as "special". The fact alone that the doctors sific
216 in relation to Sec. holding clinics in the Center are those duly accredited by the Association who Local atio
215 of the LGC classifies owns the Hospital, and these doctors are the ones who can treat the Govern Asse nVS
1 all lands, buildings and
Hospital's patients confined in it, takes away the said Medical Arts Center ment ssme Com 2016
4 other improvements from being categorized as "commercial" since a tertiary hospital is required by Taxatio nt mer
thereon actually,
directly, and exclusively law to have a pool of physicians who comprise the required medical n cial
used for hospitals as departments in various medical fields (City Assessor of Cebu City v. Clas
"special." A special Association of Benevola de Cebu, Inc., 524 SCRA 128 [2007]). sific
classification prescribes atio
a lower assessment than n
a commercial
classification.Within the
premises of the Hospital,
the Association
constructed the St.
Michael's Medical Arts
Center (Center) which
will house medical
practitioners who will
lease the spaces therein
for their clinics at
prescribed rental rates.
The doctors who treat
the patients confined in
the Hospital are
accredited by the
Association.The City
Assessor classified the
Center as "commercial"
instead of "special" on
the ground that the
Hospital owner gets
income from the lease of
its spaces to doctors
who also entertain out-
patients. Is the City
Assessor correct in
classifying the Center as
"commercial?" Explain.
(5%)
 Pursuant to Sec. 11 of
the "Host Agreement"
between the United
Nations and the
Philippine government,
it was provided that the
World Health
Organization (WHO), "its
assets, income and
other properties shall be
: a) exempt from all
direct and indirect
taxes." Precision No. Since World Health Organization (WHO), the contractee, is
Construction exempt from direct and indirect taxes pursuant to an international agreement
Corporation (PCC) was where the Philippines is a signatory, the exemption from indirect taxes should
hired to construct the mean that the entity or person exempt is the contractor itself because the Purs
WHO Medical Center in manifest intention of the Agreement is to exempt the contractor so that no Gran uant
Manila. Upon completion tax may be shifted to the contractee (CIR v. John Gotamco & SOns, Inc. 148 Value- t of tp
1 of the building, the BIR
SCRA 36 [1987]). The immunity of WHO from indirect taxes extends to th Added Exe Host 2016
5 assessed a 12% VAT on
the gross receipts of
econtractor by treating the sale of service as effectively zero-rated when teh Tax mpti Agr
PCC derived from the law provided that - "services rendered to persons or entities whose exemption on eem
construction of the WHO under special laws or international agreements to which the Philippines is a ent
building. The BIR signatory effectively subjects the supply of such service to zero percent (0%)
contends that the 12% rate" (Section 108(B)(3), NIRC). Accordingly the BIR is wrong in assessing the
VAT is not a direct nor 12% VAT from the contractor, Precision Construction Corporation.
an indirect tax on the
WHO but a tax that is
primarily due from the
contractor and is
therefore not covered by
the Host Agreement.
The WHO argues that
the VAT is deemed an
indirect tax as PCC can
shift the tax burden to
it. Is the BIR correct?
Explain. (5%)
 Lucky V Corporation
(Lucky) owns a IO-
storey building on a
2,000 square meter lot
in the City of Makati. It
sold the lot and building
to Rainier. for P80
million. One month
after, Rainier sold the lot
and building to Healthy
Smoke Company (HSC)
for P200 million. Lucky
filed its annual tax
return and declared its
gain from the sale of the Yes, API's Petition for Review will prosper. The Supreme Court held in the case
lot and building in the of San Roque that, as an exception to the mandatory 120+30 day period, a
amount of clai clai
judicial claim for VAT refund which was filed with the CTA before the lapse of
P750,000.00.An m m
the 120-day perioed is considered to have been timely made of wuch filing Tax
1 investigation conducted for for
occurred on or after Dec. 10, 2003 (date of issuance of BIR Ruling No. DA-489- Remedi 2016
6 by the BIR revealed that tax tax
two months prior to the
03) but before Oct 6, 2010 ( promulgation of Aichi Case). BIR Ruling DA-489- es
refu refu
sale of the properties to 03, qs a general interpretative rule may be relied upon by taxpayers, expressly
nd nd
Rainier, Lucky received statung that the taxpayer need not wait for the lapse of the 120-day period
P40 million from HSC before it could seek judicial relief with CTA by way of Petition for Review.
and not from Rainier.
Said amount of P40
million was debited by
HSC and reflected in its
trial balance as "other
inv. - Lucky Bldg." The
month after, another
P40 million was reflected
in HSC's trial balance as
"other inv. - Lucky
Bldg." The BIR
concluded that there is
tax evasion since the
real buyer of the
properties of Lucky is
HSC and not Rainier. It
issued an assessment
for deficiency income
tax in the amount of P79
million against Lucky.
Lucky argues that it
resorted to tax
avoidance or a tax
saving device, which is
allowed by the NIRC and
BIR rules since it paid
the correct taxes based
on its sale to Rainier. On
the other hand, Rainier
and HSC also paid the
prescribed taxes arising
from the sale by Rainier
to HSC. Is the BIR
correct in assessing
taxes on Lucky? Explain.
(5%)
 Peter is the Vice-
President for Sales of
Golden Dragon Realty
Conglomerate, Inc.
(Golden Dragon). A
group of five (5) foreign
investors visited the
country for possible
investment in the
condominium units and
subdivision lots of
Golden Dragon. After a
tour of the properties for
sale, the investors were
wined and dined by
Peter at the posh
Conrad's Hotel at the
cost of Pl 50,000.00.
1 Afterward, the investors
2016
7 were brought to a party
in a videoke club which
cost the company
P200,000.00 for food
and drinks, and the
amount of P80,000.00
as tips for business
promotion officers.
Expenses at Conrad's
Hotel and the videoke
club were receipted and
submitted to support the
deduction for
representation and
entertainment expenses.
Decide if all the
representation and
entertainment expenses
claimed by Golden
Dragon are deductible.
Explain. (5%)
 Amor Powers, Inc. (API)
is a domestic
corporation registered
with the BIR as a value-
added taxpayer. API
incurred excess input
VAT in the amount of
P500,000,000.00 on
August 3, 2008. Hence,
it filed with the BIR an
administrative claim for
the refund or credit of
these input taxes on
August 15, 2010.
Without waiting for the
CIR to act on its claim,
API filed a Petition for
Review with the CT A on
1 September 15, 2010
2016
8 before the lapse of two
years after the close of
the taxable quarter
concerned.In its
Comment on the
Petition, the CIR argues
that API's Petition
should be dismissed as
it was filed before the
lapse of the 120-day
period given to the CIR
by Sec. 112(D) of the
NIRC, which became
effective on January 1,
1998. For the CIR, the
120- day period is
mandatory and
jurisdictional so that any
suit filed before its
expiration is premature
and, therefore,
dismissible.API, on the
other hand, invokes BIR
Ruling No. DA-489-03
issued by the CIR on
December 10, 2003 in
answer to a query posed
by the Department of
Finance regarding the
propriety of the actions
taken by Lazi Bay
Resources Development,
Inc., which filed an
administrative claim for
refund with the CIR and,
before the lapse of the
120-day period from its
filing, filed a judicial
claim with the CTA. BIR
Ruling No. DA-489-03
stated that the
taxpayer-claimant need
not wait for the lapse of
the 120-day period
before it could seek
judicial relief with the
CTA.Will API's Petition
for Review prosper?
Decide with reasons.
(5%)
 The requisites for a valid
waiver of the three-year
(3-year) prescriptive
period for the BIR to
assess taxes due in the
taxable year are
prescribed by Revenue
Memorandum Order
(RMO) No. 20-90:1. The
waiver must be in the
proper form prescribed
by RMO 20-90.2. The
waiver must be signed
by the taxpayer himself
or his duly authorized
representative. In the
case of a corporation,
the waiver must be
1 signed by any of its
2016
9 responsible officials. In
case the authority is
delegated by the
taxpayer to a
representative, such
delegation should be in
writing and duly
notarized.3. The waiver
should be duly
notarized.4. The CIR or
the revenue official
authorized by him must
sign the waiver
indicating that the BIR
has accepted and
agreed to the waiver.
The date of such
acceptance by the BIR
should be indicated.
However, before signing
the waiver, the CIR or
the revenue official
authorized by him must
make sure that the
waiver is in the
prescribed form, duly
notarized, and executed
by the taxpayer or his
duly authorized
representative.5. Both
the date of execution by
the taxpayer and date of
acceptance by the
Bureau should be before
the expiration of the
period of prescription or
before the lapse of the
period agreed upon in
case a subsequent
agreement is
executed.6. The waiver
must be executed in
three copies, the original
copy to be attached to
the docket of the case,
the second copy for the
taxpayer and the third
copy for the Office
accepting the waiver.
The fact of receipt by
the taxpayer of his/her
file copy must be
indicated in the original
copy to show that the
taxpayer was notified of
the acceptance of the
BIR and the perfection
of the agreement.After
being assessed by the
BIR with alleged
deficiency income taxes,
VVV Corporation (VVV)
through Enrique, its
President, executed a
waiver of the
prescriptive period. The
waiver was signed by
Revenue District Officer
(RDO) Alfredo. However,
the waiver did not state
the date of execution by
the taxpayer and date of
acceptance by the BIR.
Enrique was also not
furnished a copy of the
waiver by the BIR.VVV
claims that the waiver is
void due to non-
compliance with RMO
20-90. Hence, the
period for assessment
had already prescribed.
Moreover, since the
assessment involves P2
million, the waiver
should have been signed
by the CIR and instead
of a mere RDO. On the
other hand, the BIR
contends that the
requirements ofRMO No.
20-90 are merely
directory; that the
execution of the waiver
by VVV was a
renunciation of its right
to invoke prescription
and that the
government cannot be
estopped by the
mistakes committed by
its revenue officers. Is
VVV liable? Explain.
(5%)
 Henry, a U.S.
naturalized citizen, went
home to the Philippines
to reacquire Philippine
citizenship under RA
9225. His mother left
him a lot and building in
Makati City and he
wants to make use of it
in his trading business.
Considering that he
needs money for the
business, he wants to
sell his lot and building
and make use of the
consideration. However,
the lot has sentimental
value and he wants to
2 reacquire it in the
2016
0 future. A friend of Henry
told him of the "sale-
leaseback transaction"
commonly used in the
U.S., which is also used
for tax reduction. Under
said transaction, the lot
owner sells his property
to a buyer on the
condition that he leases
it back from the buyer.
At the same time, the
property owner is
granted an option to
repurchase the lot on or
before an agreed date.
Henry approaches you
as a tax lawyer for
advice.Explain what tax
 benefits, if any, can be
obtained by Henry and
the buyer from the sale-
leaseback transaction?
(5%)

Jennifer is the only

daughter of Janina who
was a resident in Los
Angeles, California,
U.S.A. Janina died in the
U.S. leaving to Jennifer
one million shares of
Sun Life (Philippines),
Inc., a corporation
2 organized and existing
2016
1 under the laws of the
Republic of the
Philippines. Said shares
were held in trust for
Janina by the Corporate
Secretary of Sun Life
and the latter can vote
the shares and receive
dividends for Janina.
The Internal Revenue
 Service (IRS) of the U.S.
taxed the shares on the
ground that Janina was
domiciled in the U.S. at
the time of her death.

[a] Can the CIR of the

Philippines also tax the
same shares? Explain.
(2.5%)

Jennifer is the only

daughter of Janina who
was a resident in Los
Angeles, California,
U.S.A. Janina died in the
U.S. leaving to Jennifer
one million shares of
Sun Life (Philippines),
Inc., a corporation
organized and existing
under the laws of the
2 Republic of the
2016
2 Philippines. Said shares
were held in trust for
Janina by the Corporate
Secretary of Sun Life
and the latter can vote
the shares and receive
dividends for Janina.
The Internal Revenue
Service (IRS) of the U.S.
taxed the shares on the
ground that Janina was
domiciled in the U.S. at
 the time of her
death.[b] Explain the
concept of double
taxation. (2.5%)

Patrick is a successful
businessman in the
United States and he is
a sole proprietor of a
supermarket which has
a gross sales of $10
million and an
annual income of $3
million. He went to the
Philippines on a visit
and, in a party, he saw
Atty. Agaton who boasts
2 of being a tax expert.
2016
3 Patrick asks Atty.
Agaton: if he (Patrick)
decides to reacquire his
Philippine citizenship
under RA 9225,
establish residence in
this country, and open a
supermarket in Makati
City, will the BIR tax
him on the income he
earns from his U.S.
business? If you were
Atty. Agaton, what
advice will you give
Patrick? (5%)