BAR EXAMINATION 2006TAXATION LAW 10 September 2006 2 P.M. - 5 P.M. INSTRUCTIONS This questionnaire consists of fourteen (14) numbers contained in eight (8) pages. Read each question very carefully. Answer legibly, clearly, and concisely. Start each number on a separate page; an answer to a sub-question under the same number may be written continuously on the same page and immediately succeeding pages until completed. Do not repeat the question. A mere "Yes" or "No" answer without any corresponding discussion will not be given any credit. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE GOOD LUCK!!! Signed ANGELINA S. GUTIERREZ Chairperson 20006 Bar Examination Committee PLEASE CHECK THE NUMBER OF PAGES IN THIS SET WARNING: NOT FOR SALE OR UNAUTHORIZED USE TAXATION LAW -I1. Enumerate the 3 stages or aspects of taxation. Explain each. 5% 2. Distinguish "direct taxes" from "Indirect taxes". Give examples. 5% - II What is tax pyramiding? What is its basis in law? 5% - III What properties are exempt from the real property tax? 5% - IV Royal Mining is a VAT -registered domestic mining entity. One of its products is silver being sold to the Bangko Sentral ng Pilipinas. It filed a claim with the BIR for tax refund on the ground that under Section 106 of the Tax Code, sales of precious metals to the Bangko Sentral are considered export sales subject to zero-rated VAT. Is Royal Mining's claim meritorious? Explain. 5% -VVanishing deduction is availed of by taxpayers to: a. correct his accounting records to reflect the actual deductions mad b. reduce his gross income c. reduce his output value-added tax liability d. reduce his gross estate Choose the correct answer. Explain. 5% 1. The Constitution provides "charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and non- profit cemeteries and all lands, buildings, and improvements actually, directly and exclusively used for religious, 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. 5% 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 - VI 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. 1. If in a taxable year a 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. 2.5% 2. Can the BIR require the bookstores to deduct the amount of the discount from their gross income? Explain. 2.5% 3. If a bookstore closes its business due to losses without being able to recoup the discount, can it 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. 5% - VII Congress enacts a law imposing a 5% tax on the gross receipts of common carriers. The law does not define the term "gross receipts". Express Transport, Inc., a bus company plying the ManilaBaguio route, has time deposits with ABC Bank. In 2005, Express Transport 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. 5% - VIII On June 1, 2003, Global Bank received a final notice of assessment from the BIR for deficiency documentary stamp tax in the amount of P5 Million. On June 30, 2003, Global Bank filed a request for reconsideration with the Commissioner of Internal Revenue. The Commissioner denied the request for reconsideration only on May 30, 2006, at 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. 5% - IX The Commissioner of Internal Revenue issued an assessment for deficiency income tax for taxable year 2000 last July 31, 2006 in the amount of P10 Million inclusive of surcharge and interests. If the delinquent taxpayer is your client, what steps will you take? What is your defense? 10% -XThe 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 the correct courts/agencies, observing their proper hierarchy. 5% 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 - XI - Charlie, a widower, has two sons by his previous marriage. Charlie lives with Jane who is legally married to Mario. They have a child named Jill. The children are all minors and not gainfully employed. 1. How much personal exemption can Charlie claim? Explain. 2.5% 2. How much additional exemption can Charlie claim? Explain. 2.5% - XII Mr. Abraham Eugenio, a pawnshop operator, after having been required by the Revenue District Officer to pay value added tax pursuant to a Revenue Memorandum Order (RMO) of the Commission.er of Internal Revenue, filed with the Regional Trial Court an action questioning the validity of the RMO. If you were the judge, will you dismiss the case? 5% - XIII Gerry was being prosecuted by the BIR for failure to pay his income tax liability for Calendar Year 1999 despite several demands by the BIR in 2002. The Information was filed with the RTC only last June 2006. Gerry filed a motion to quash the 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? 5% - XIV 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 following year, the corporation declared a net operating loss. When the income tax return of the corporation was reviewed by the BIR the following year, it disallowed as item of deduction the P75 Million bonus the corporation gave its officials and employees on the ground of unreasonableness. The corporation claimed that the bonus is an ordinary and necessary expense that should be allowed. If you were the BIR Commissioner, how will you resolve the issue? 5% - XV Lily's Fashion, Inc. is a garment manufacturer located and registered as a Subic Bay Freeport Enterprise under Republic Act No. 7227 and a non-VAT taxpayer. As such, it is exempt from payment of all local and national internal revenue taxes. During its operations, it purchased various supplies and materials necessary in the conduct of its manufacturing business. The suppliers of these goods shifted to Lily's Fashion, Inc. the 10% VAT on the purchased items amounting to PS00,000.00. Lily's Fashion, Inc. filed with the BIR a claim for refund for 'the input tax shifted to it by the suppliers. If you were the Commissioner of Internal Revenue, will you allow the refund? 5% - XVI 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 listed shall be sold at public auction. Joachin is one of those named in the list. He purchased a real property in 1996 but failed to register the document of sale with the Register of Deeds and secure a new 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. 1. If you were the judge, how will you resolve this issue? 2.5% 2. Assuming Joachin is a registered owner, will your answer be the same? 2.5% NOTHING FOLLOWS. BAR EXAMINATION 2007 TAXATION LAW 9 September 2007 2 P.M. - 5 P.M. INSTRUCTIONS This questionnaire consists of thirteen (13) numbers contained in seven (7) pages. Read each question very carefully. Answer legibly, clearly, and concisely. Start each number on a separate page; an answer to a sub-question under the same number may be written continuously on the same page and immediately succeeding pages until completed. Do not repeat the question. A mere "Yes" or "No" answer without any corresponding discussion will not be given any credit. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE GOOD LUCK!!! Signed ADOLFO S. AZCUNA Chairperson 2007 Bar Examination Committee PLEASE CHECK THE NUMBER OF PAGES IN THIS SET WARNING: NOT FOR SALE OR UNAUTHORIZED USE TAXATION LAW I. (5%) What is the nature of the taxing power of the provinces, municipalities and cities? How will the local government units be able to exercise their taxing powers? II. (10%) 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% franchise tax in lieu of all taxes. The legislative franchises of Smart and Globe Telecoms were granted in 1998. Their legislative franchises state that they will pay only 5% franchise tax in lieu of all taxes. The Province of Zamboanga del Norte passed an ordinance in 1997 that imposes a local franchise tax on all telecommunication companies operating within the province. The tax is 50% of 1% of the gross annual receipts of the preceding calendar year based on the incoming receipts, or receipts realized, within territorial jurisdiction. Is the ordinance valid? Are PLDT, Smart and Globe liable to pay franchise taxes? Reason briefly. III. (5%) What kind of taxes, fees and charges are considered as National Internal Revenue Taxes under the National Internal Revenue Code (NIRC)? IV. (10%) 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 first impression, which means the interpretations made by the Commissioner of Internal Revenue is one without established precedents. Subsequently, 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. a. What are BIR rulings? b. What is required to make a BIR ruling of first impression a valid one? c. Does a BIR ruling have a retroactive effect, considering the principle that tax exemptions Is his purchase of the three condominium units subject to any tax? Reason briefly. Bulacan to XYZ Corporation. The Revenue District Officer (RDO). 30 years old. (10%) ABC Corporation sold a real property in Malolos. refused to issue the Certificate Authorizing Registration for the reason that based on his ocular inspection the property should have a higher zonal valuation determined by the Commissioner of Internal Revenue because the area is already a commercial area. is the sister of Edgardo Santos. Should the difference in the supposed taxable value be legally subject to donor's tax? Reason briefly. Every time he comes to the Philippines. he stays here for about a month. Accordingly. She died in an airplane crash. The property has been classified as residential and with a zonal valuation of P1. Does the US$1. b. While in the Philippines. (5%) Antonia Santos. however. VII. a. 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. he purchased three condominium units in Makati which he is renting out for P15. 000 pension become taxable because he is now residing in the Philippines? Reason briefly. He regularly receives a pension from his former employer in the United States. Is the P10 Million subject to estate tax? Reason briefly. (5%) Z is a Filipino immigrant living in the United States for more than 10 years. a. 000 per square meter. He is retired and he came back to the Philippines as a balikbayan. 000 a moth each. 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. This is what Antonia would have earned as somebody who was gainfully employed. The capital gains tax was paid based on the zonal value. with his pension pay from his former employer. VI. Edgardo is a lawyer and he negotiated with the airline company and insurance company and they were able to a agree total settlement of P10 Million. Edgardo was her only heir. b.should be interpreted strictly against the taxpayer? V. a. gainfully employed. Should Edgardo report the P10 Million as his income being Antonia's only heir? Reason . amounting to US$1. b. 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. 000 a month. (10%) Noel Santos is a very bright computer science graduate. 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. Therefore. They agreed that they would divide the lots between them. contending that the sack of rice is considered as additional compensation for the rank and file employees and additional fringe benefit for the supervisions and managers. He was hired by Hewlett Packard. (10%) 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. the employer should be the one assessed pursuant to Section 33 (a) of the NIRC. a. X. Is there a legal basis for the assessment made by the BIR? Explain your answer. the BIR assessed the company for failure to withhold the corresponding withholding tax on the amount equivalent to the one sack of rice received by all the employees. During an audit investigation made by the Bureau of Internal Revenue (BIR). Are the allocation and distribution of the saleable lots to Weber and prime subject to income tax and to expanded withholding tax? Explain briefly. b. he was offered the arrangement that part of is compensation would be an insurance policy with a face value of P20 Million. IX. Does the JVA entered into by and between Weber and Prime create a separate taxable entity? Explain briefly. a. The parents of Noel are made the beneficiaries of the insurance policy. Can the company deduct from its gross income the amount of the premium? Briefly. b. XI. (5%) . Weber Realty as owner of the land contributed the land to the Joint Venture and Prime Development agreed to develop the same into a residential subdivision and construct residential houses thereon. Will the proceeds of the insurance form part of the income of the parents of Noel and be subject to income tax? Reason briefly. VIII. supervisors and managers) one sack of rice every month valued at P800 per sack. To entice him to accept the offer for employment. 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.briefly. c. (5%) Nutrition Chippy Corporation gives all its employees (rank and file. For the supervisors and managers. (5%) Remedios. the Bureau of Internal Revenue (BIR) refused to issue the TCC on the basis of the fact that the corporation is under audit by the BIR and it has a potential tax liability. XIII. 2006 and filed the estate tax. an answer to a subquestion under the same number may be written continuously on the same page and on the immediately succeeding pages until completed. he asked the Commissioner of Internal Revenue to give him one year to pay the estate tax due. A mere " Yes " or " No " answer without any corresponding discussion will not be given any credit.The Congregation of the Mary Immaculate donated a land a dormitory building located along España St. 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. Does the Commissioner of Internal Revenue have the power to extend the payment of estate tax? If so. The Commissioner approved the request for extension of time provided that the estate tax be computed on the basis of the value of the property at the time of payment of the tax. She died leaving three condominium units in Quezon City valued at P5 Million each. (5%) ABC Corporation won a tax refund case for P50 Million.M. INSTRUCTIONS This questionnaire consist of fifteen ( 15 ) questions contained in eight ( 8 ) pages. 2006. . Is there a valid justification for the BIR to withhold the issuance of the TCC? Explain your answer briefly. in favor of the Sisters of the Holy Cross. Do not repeat the question. . Upon execution of the judgement and when trying to get the tax Credit Certificates (TCC) representing the refund.5 P.M. He reported her death on December 5. BAR EXAMINATION 2008 TAXATION LAW 14 September 2008 2 P. a. NOTHING FOLLOWS. a group of nuns operating a free clinic and high school teaching basic spiritual values. a resident citizen. Read each question very carefully. died on November 10. Start each number on a separate page. clearly and concisely. what are the requirements to allow such extension? b. Answer legibly. XII. Is the donation subject to donor's tax? Reason Briefly. Rodolfo was her only heir. You will be given credit for your knowledge of legal doctrine and for the quality of your legal reasoning. A ) Is the BIR correct in valuing the real property at P40 million? Explain. which was subject to matter of a Joint Venture Agreement about to be implemented with Star Land Corporation ( SLC ). by including in the gross estate the real property at P2 million. 2008. Juan Gonzales agreed to exchange his agricultural lot in Laguna for a one-half hectare residential property located in Batangas. What is the nature of real properties exchanged for tax purposes . a 100-hectare agricultural land in Sta.HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE GOOD LUCK!!! Signed DANTE O. into first-class residential and commercial centers. what is the tax based and rate? Explain. Rosa. the prices of real properties in the locality have doubled. Is Alpha Corporation subject to income tax on the exchange of property? If so. by valuing the real property at P40 million. what is the tax base and rate? Explain. married to Maria Cerna. a domestic corporation engaged in the purchase and sale of real property. ( 3% ) II Jose Cerna. owned by Alpha Corporation. As a result. Alpha Corporation acquired the property in 2007 for P9 million. The spouses owned. Laguna with current fair market value of P20 million. After 9 months. a well-known real estate development company. Is Juan Gonzales subject to income tax on the exchange of property? If so. In January 1970. the administrator of the estate and SLC jointly announced their big plans to start conversion and development of the agricultural lands in Sta. Filipino citizen. died in a vehicular accident in NLEX on July 10. On January 5. Rosa. He bought the said real property for P2 million fifty years ago. This property has a current fair market value of P10 million in view of the construction of a concrete road traversing the property. ( 3% ) c. The administrator of the Estate of Jose Cernan filed the estate tax return on January 9. ( 3% ) B ) If you disagree. among others.capital asset or ordinary asset? Explain. with a fair market value of P10 million.000. 2007. ( 3% ) b. Juan Gonzales bought one hectare of agricultural land in Laguna for P100. Laguna. a. what is the correct value .2008. the BIR issued deficiency estate tax assessment. TINGA Chairperson 2008 Bar Examination Committee PLEASE CHECK THE NUMBER OF PAGES IN THIS SET WARNING: NOT FOR SALE OR UNAUTHORIZED USE TAXATION LAW I. . California. A BIR ruling. 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. Are the importations of motor vehicles from abroad subject to customs duties and value added taxes? Explain. Said property has been leased to MAS Corporation. confirming the tax-free exchange of property for shares of stock. Inc. which it stores in a warehouse in Subic Bay. DEF Corporation paid annual royalties to DEF. The withholding tax return was filed and tax remitted to the BIR on January 10 of the following year. ( 4% ) b. owned 99% by Maria Suerte. for the use of the latter's software.650. 2004. arising from erroneously paid income taxes covering the years 2004 and 2005.000 x 5% plus P298. a real estate developer.895. ( 3% ) V Maria Suerte. Inc..00 ( 35% on P299 million gain from sale of real property ). was secured from the BIR National Office and a Certificate Authorizing Registration was issued by the Revenue District Officer (RDO) where the property was located. a domestic corporation engaged in manufacturing paper products. a. ( 3% ) III DEF Corporation is wholly owned subsidiary of DEF. As a BIR lawyer handling the case. USA.000 ( P100. and (b) balance. withheld and remitted to the BIR the 15% final tax based on the gross royalty payments. instead of the corporate income tax of P104. to persons residing in the customs territory.900. ( 3% ) IV 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 view of the tax advice. Maria Suerte paid only the capital gains tax of P29. EIP Corporation. if they are taxable. Subsequently. ( 4% ) b. It sold these motor vehicles in April 2008. expressed its desire to buy the Makati property at its fair market value P300 million. payable equally in twenty four (24) monthly consecutive installments.00 x 10% ). The following day. would you raise the defense of prescription in your answer to the claim for tax credit? Explain. Can the BIR lawyer raise the defense that DEF Corporation is not the proper party to file such claim for tax credit? Explain. In October 2007. it imported several second-hand motor vehicles from Japan and Korea. After evaluating the capital gains tax . 2007 DEF Corporation filed written claim for tax credit with the BIR. purchased a lot in Makati City in 1980 at a price of P1 million. DEF Corporation filed a petition for review with the court of Tax Appeals involving the tax credit claim for 2004 and 2005. a. a Filipino citizen. payable as follows : (a) P60 million down payment.to used for estate tax purposes? Explain. as with holding agent of the government. Maria Suerte exchanged her Makati property for shares of stock of MAS Corporation. Upon the advice of a tax lawyer. On April 10. for which the former. In December 2007. she sold her entire stock holdings in MAS Corporation to EIP Corporation for P300 million. Starting December 15. 00 Funeral Expenses 300.000.000. and only son Jaime.payment. stating .00 Cars P2. what legal defense(s) would you raised against the assessment? Explain.000.00 a.00 P1.000. the RDO wrote a letter to Maria Suerte. met an accident that caused the instantaneous death of Jaime. Pedro Asuncion.000. containing the tax assessment.000 deficiency interest of P400. but without the demand letter.500.00 Mortgage Payable 2. imposing a 5% tax on gross receipts on rentals of space in privately-owned public markets.00 Land 5.200. was mailed and released by the BIR on April 15. Slating that she commited tax evasion. ( 4% ) b.000. 2007.00 Residential House 4. The registered letter. Is the contention of the RDO tenable? Or was it tax avoidance that Maria Suerte had resorted to? Explain.000 and due date for payment of April 30. showing basic tax of P1. The following day. The spouses and their son had the following assets and liabilities at the time of death : Assunta Exclusive Cash Conjugal Jaime Exclusive P10.000.000.000.000. Assunta also died in the hospital.00 2.00. What is an assessment notice? What are the requisites of a valid assessment? Explain ( 3% ) b.000. Is the Estate of Jaime Asuncion liable for estate tax? Explain. Is vanishing deduction applicable to the Estate of Assunta Asuncion? Explain ( 4% ) VII After examining the books and records of EDS Corporation.000.000. ( 3% ). As tax lawyer of EDS Corporation.00 500. BAT Corporation questioned the validity of the ordinance. the 2004 final assessment notice. 2007. 2007 a. ( 6% ) VI While driving his car to Baquio last month. VIII The City of Manila enacted an ordinance.000. together with his wife Assunta. was received by the EDS Corporation on April 25. owns a vacation house and lot in San Francisco. for P20 million. ( 5% ) IX William Antonio imported into the Philippines a luxury car worth US$100.000. Is the BIR officer's tax assessment correct? Explain. On February 9. the BIR officer assessed Manalo for deficiency income tax computed as follows: P5 million ( P20 million less P 15 million ) x 35% = P1.S. Citizen residing in Makati City. declared only for US$20.S. who is another U.75 million deficiency income tax. a. the Collector of Customs discovered the underdeclaration and he initiated forfeiture proceedings of the imported car.that the tax is an income tax.2 million representing 6% capital gain tax. California.000. 2006 he sold said real property to Juan Mayaman. a. may the Collector of Customs declare the imported car forfeited in favor of the government? Explain. On January 10. U. however. what advice would you give him to protect his interest? Explain. ( 3% ) . Do you agree with the position of BAT Corporation? Explain.A. After the tax audit conducted in 2007. ( 3% ) b. If John McDonald deriectly sold the shares to his best friend. ( 3% ) b. at a gain of P200.S. Citizen residing in Makati. If you were hired by Manalo as his tax consultant. without the capital gains tax paid being allowed as tax credit. Since Manalo did not derive any ordinary income.2 million capital gains tax should be credited from P1. Manalo consulted a real estate broker who said that the P1.75 million.000 and corresponding customs duties and taxes were paid thereon. Is John McDonald subject to Philippine Income Tax on the sale of his shares through his stockbroker? Is he liable for any other tax? Explain. This car was. Are forfeiture proceedings of goods illegally imported criminal in nature? Explain ( 3% ) X John McDonald. bought shares of stock of a domestic corporation whose shares are listed and traded in the Philippine Stock Exchange at the price of P2 million Yesterday. he sold the shares of stock through his favorite Makati stockbroker at a gain of P200. 2006 Manalo filed the capital gains tax return and paid P1. no income tax returnn was filed by him for 2006. A Filipino citizen residing in Makati City. what is the ntax base and rate? ( 3% ) XI Pedro Manalo. which he acquired in 2000 for P15 million. another Filipino citizen residing in Quezon City. a U. Subsequently.00. a. which cannot be imposed by the city government. ( 3% ) b. Is he liable for Philippine Income Tax? If so. 000. 2006 to December 31. are the owners of a residential house and lot in Quezon City.44 million for the year.000 a month beginning January 2008? Explain.000.000. 2006. to Maria. a. the spouses donated said real property to them. January 1. (3%) XIII MNO Corporation was organized on July 1. Since MNO Corporation adopted fiscal year ending June 30 as its taxable year for income tax purpose. At the time of donation. starting January 2007. Is the non-stock. 2006 P 5. the Board of Directors of the corporation agreed to lease part of the ground floor of the condominium building to DEF Saving Bank for P120. the real property has a fair market value of P2 million. Is the position of the city treasurer tenable? Explain. 2007 based on gross dales of P15 million. San Juan City. non-profit association liable for value added tax in 2007? If your answer is in the negative. how much is the taxable gift of each . (3%) XIV Spouses Jose San Pedro and Clara San Pedro.0000.000. Its book of account and income statement showing gross sales as follows: July 1. both Filipino citizens. b) Are Jose and Clara subject to donor's tax? If so. non profit association of unit owner in Greenhills Tower. 2007 P 10. Are Mario and Maria subject to income tax the value of the real property donated to them? Explain. (3%) b. is it liable for another kind of business tax? (4%) b. July 1.000 a month or P1. May the deficiency business tax be paid in installments without surcharge and interest? Explain. Quezon City. 2007 to June 30. a. Will the association be liable for value added tax in 2008 if it increases the rental to P150. the Quezon City Treasurer assessed the corporation for deficiency business tax for 2007 based on gross sales of P25 million alleging that local business taxes shall be computed based on calendar year.000. with principal place of business in Cubao. (4%) b. 2007 to December 31. However. To be able to reduce the association dues being collected from the unit owners. a. 2007 P 15. to engage in trading of school supplies.XII Greenhills Condominium Corporation incorporated in 2001 is a non-stock. Mario. After the recent wedding of their son. it paid its 2% business tax for fiscal year ending June 30. Is the bank correct in withholding the 20% final tax on the entire interest income? Explain. Answer the questions directly and concisely. Write your answers to Part I and Part II in the corresponding portions indicated in the booklet. Do not repeat the questions. for a total number of eleven (11) pages. the bank paid interest income of P10. Renato is an overseas worker in Hong Kong while Judy lives and works in Manila. The bank withheld final income tax equivalent to 20% of the entire interest income and remitted the same to the BIR. NACHURA CHAIRPERSON 2009 BAR EXAMINATIONS COMMITTEE .5 P. a.M. INSTRUCTIONS This questionnaire is in TWO (2) PARTS: Part I with ten (10) questions (numbered I to X). spouses Renato and Judy Garcia opened peso and dollar deposits at the Philippine branch of the Hong Kong Bank in Manila. (4%) XV In 2007.000 on the peso deposit and USS1. (3%) NOTHING FOLLOWS. GOOD LUCK! _____________________________________ ANTONIO EDUARDO B. contained in five (5) pages. Write legibly. BAR EXAMINATION 2009 TAXATION LAW 13 September 2009 2 P.spouse and what rate shall be applied to the gift? Explain. an answer to a subquestion under the same number may be written continuously on the same page and succeeding pages until completed. During the year.M. Are the interest incomes on the bank deposits of spouses Renato and Judy Garcia subject to income tax? Explain. (4%) b. contained in six (6) pages. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE.000 on the dollar deposit. and Part II with ten (10) questions (numbered XI-XX). Begin your answer to each numbered question on a separate page. . At the time of her father's death on March 14.00 per square meter. why not? (4%) IV International Technologies. how much and why? If not. The doctrine of equitable recoupment allows a taxpayer whose claim for refund has prescribed to offset tax liabilities with his claim of overpayment. Explain each item briefly.00. A law that allows taxes to be paid either in cash or in kind is valid.000. b. Inc. The prevailing market value of the property at the time of the sale was P3.000. or FALSE if the statement is false. d. Is Melissa liable to pay Value Added Tax (VAT) on the sale of the property? If so. she sold the lot for P600.000. A false return and a fraudulent return are one and the same.PLEASE CHECK THAT THIS SET CONTAINS TWELVE (12) PAGES (INCLUDING THIS PAGE) WARNING: NOT FOR SALE OR UNAUTHORIZED USE TAXATION PART I I TRUE or FALSE. how much and why? If not. (4%) III Melissa inherited from her father a 300-square-meter lot. (ITI) filed a claim for refund for unutilized input VAT with the Court of . Is Melissa liable to pay capital gains tax on the transaction? If so. a. the property was valued at P720. 1996.00. on cash basis. On February 28. c. Answer TRUE if the statement is true. II Enumerate the four (4) inherent limitations on taxation. Explain your answer in not more than two (2) sentences. to defray the cost of the medical expenses of her sick son. the Commissioner of Internal Revenue may validly compromise the tax liability. When the financial position of the taxpayer demonstrates a clear inability to pay the tax. e. A law imposing a tax on income of religious institutions derived from the sale of religious articles is valid. (5%) a. why not? (4%) b. 1995. Is the ordinance valid? Explain your answer. Quezon. margarine. demanding the refund of the storage fees it paid under protest. Philippine Airlines (PAL). 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. was seized and brought by government agents to a government impounding facility. edible oil. organized under the laws of Kenya. Aggrieved. (4%) V Jessie brought into the Philippines a foreign-made luxury car.Tax Appeals (CTA). the Bureau of Customs instituted seizure proceedings and issued a warrant of seizure and detention. The Commissioner of Internal Revenue assessed KIA deficiency income taxes at the rate of 35% on its taxable income. Its commercial airplanes do not operate within Philippine territory. MMC goes to court to challenge the validity of the ordinance. The car. The Metropolitan Manufacturing Corporation (MMC). The Collector of Customs denied Jessie's request for the withdrawal of the warrant. Quezon. ITI offered in evidence only the summary prepared by the CPA. and paid less than the actual taxes and duties due. with principal office in Makati. (4%) VII Kenya International Airlines (KIA) is a foreign corporation. used as storage space for the copra purchased in Sampaloc and nearby towns before the same is shipped to Makati.156. In the course of the trial. 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%) VI The Sangguniang Bayan of the Municipality of Sampaloc. then parked inside a pay parking garage. KIA sells airplane tickets through PAL. passed an ordinance imposing a storage fee of ten centavos (P0. It is not licensed to do business in the Philippines. The total sales of airline tickets transacted by PAL for KIA in 1997 amounted to P2. (4%) b. ITI engaged the services of an independent Certified Public Accountant (CPA) who examined the voluminous invoices and receipts of ITI. . Can the CTA grant ITI's claim for refund based only on the CPA's summary? Explain. is engaged in the manufacture of soap. and then submitted the case for decision. a Philippine corporation. a. or service passengers embarking from Philippine airports. and other coconut oil-based products.968. The firm is represented in the Philippines by its general agent. Due to the discrepancy. finding that KIA's airline ticket sales constituted income derived from sources within the Philippines. without the invoices and the receipts. Resolve with reasons Jessie's criminal complaint.00. It has a warehouse in Sampaloc.10) for every 100 kilos of copra deposited in any bodega within the Municipality's jurisdiction. and these tickets are serviced by KIA airplanes outside the Philippines. Among those subjected to the occupation tax were lawyers. directly and exclusively used by RPC.00. or service passengers embarking from Philippine airports. The Commissioner of Internal Revenue assessed KIA deficiency income taxes at the rate of 35% on its taxable income. in order to provide electricity to Southern Tagalog provinces. for the lease of JEC's power barges which shall be berthed at the port of Batangas City. a government-owned and controlled corporation. who has a law office in Manila. a Philippine corporation. 55-66 which imposes a municipal occupation tax on persons practicing various professions in the city. KIA sells airplane tickets through PAL. finding that KIA's airline ticket sales constituted income derived from sources within the Philippines.156. It is not licensed to do business in the Philippines. (4%) VIII The City of Manila enacted Ordinance No. in respect of the power barges. Decide with reasons. (3%) IX Republic Power Corporation (RPC) is a government-owned and controlled corporation engaged in the supply. In 2007. machinery. The contract also stipulates that all real estate taxes and assessments. The firm is represented in the Philippines by its general agent. and equipment therein.KIA filed a protest on the ground that the P2. He goes to court to assail the validity of the ordinance for being discriminatory. JEC received an assessment of real property taxes on the power barges from the Assessor of Batangas City. The contract provides that JEC shall own the power barges and the fixtures. Atty. Its commercial airplanes do not operate within Philippine territory. (4%) VII Kenya International Airlines (KIA) is a foreign corporation. KIA filed a protest on the ground that the P2. In 2005. and that JEC shall operate. manage and maintain the power barges for the purpose of converting the fuel of RPC into electricity. organized under the laws of Kenya.968. Mariano Batas. .156. all of which JEC shall supply at its own cost. and these tickets are serviced by KIA airplanes outside the Philippines. Philippine Airlines (PAL). shall be for the account of RPC.A. 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. generation and transmission of electric power. 7160 as they are actually. rates and other charges.00 should be considered as income derived exclusively from sources outside the Philippines since KIA only serviced passengers outside Philippine territory.968.156.968. RPC entered into an agreement with Jethro Energy Corporation (JEC). Is the position of KIA tenable? Reasons. pays the ordinance-imposed occupation tax under protest. The total sales of airline tickets transacted by PAL for KIA in 1997 amounted to P2. Is the position of KIA tenable? Reasons.00 should be considered as income derived exclusively from sources outside the Philippines since KIA only serviced passengers outside Philippine territory. fittings. 30% for individual and 35% for corporate non-resident stockholders --. even assuming that the power barges are subject to real property tax. Thus. (2%) a. because only one consolidated return is required to be filed by the spouses. For the 2nd quarter of 1983. Is the contention of ABCD Corporation correct? Why or why not? (3%) PART II XI Raffy and Wena. After office hours. All the income will be declared by Raffy alone. 1984. and Raffy will declare the income from the coffee shop.S. these U. husband and wife. ABCD filed with the Commissioner of Internal Revenue a formal claim for refund. RPC should be held liable therefor. while Wena will declare the income from the coffee shop. Which of the following is the correct way to prepare their income tax return? Write the letter only. DO NOT EXPLAIN YOUR ANSWER. Raffy will declare his own compensation income and Wena will declare hers. ABCD filed a petition with the Court of Tax Appeals (CTA) reiterating its demand for refund. Is the contention of JEC correct? Explain your answer. Each spouse shall be taxed separately on their corresponding taxable income to be covered by one consolidated return for the spouses. On May 15. Raffy will declare as his income the salaries of both spouses. The corresponding withholding tax on dividend income --. Wena will declare the combined compensation income of the spouses. alleging that under the RP-US Tax Treaty. The Commissioner denied the claim. . are both employed by XXX Corporation. d. c. in accordance with the terms of the lease agreement. The coffee shop is registered in the name of both spouses.was deducted at source and remitted to the BIR. On January 17. the deduction withheld at source as tax on dividends earned was fixed at 25% of said income. Does ABCD Corporation have the legal personality to file the refund on behalf of its nonresident stockholders? Why or why not? (3%) b. a.-based individual and corporate stockholders received cash dividends from the corporation. The income from the coffee shop shall be equally divided between them. b. 1985.S. ABCD asserted that it overpaid the withholding tax due on the cash dividends given to its non-resident stockholders in the U.Furthermore. they jointly manage a coffee shop at the ground floor of their house. (4%) X ABCD Corporation (ABCD) is a domestic corporation with individual and corporate shareholders who are residents of the United States. 000. to his only son. Xavier purchased from his friend. Yuri.000.00 to P10. who is residing in the Philippines and about to be married to a Filipino girlfriend. as successor to the painting in the event of Zandro's death. the law firm billed the corporation only in 2008. Mexico does not impose any transfer tax of whatever nature on all gratuitous transfers of property.00. already worth P1. Zandro. and Wilma succeeded to the property. Xavier died. What legal advice will you give him. Raffy will declare his own compensation income and Wena will declare hers. (3%) c. In his last will and testament.000.00. Zandro died in 2007. The monthly rental for each unit ranges from P8.00. Wilma.000. donated US$1. Should the painting be included in the gross estate of Zandro in 2007 and thus. Yuri paid all the corresponding taxes on the transaction. Is YYY's claim of deduction proper? Reasons. a painting for P500. Raffy will file one income tax return to cover all the income of both spouses.000. (3%) b. and the tax is computed on the aggregate taxable income of the spouses. and why? (4%) XV Miguel. a Mexican company. May a vanishing deduction be allowed in either or both of the estates? Explain. In 2001. (4%) XIII In 1999. YYY Corporation claimed this expense as a deduction from gross income in its 2008 return.e. because the exact amount of the expense was determined only in 2008. His gross rental income for one year is P1. For the legal services rendered in 2007. Miguelito. The income from the coffee shop shall be equally divided between them. The corporation duly paid. Should the painting be included in the gross estate of Xavier in 2001 and thus. to his legitimate son. Is Miguel entitled to the rule of reciprocity in order to be exempt from the Philippine donor's tax? Why or why not? (3%) . a. be subject to estate tax? Explain. be subject to estate tax? Explain.650. Xavier bequeathed the painting. a citizen and resident of Mexico. He consults you on whether it is necessary for him to register as a VAT taxpayer.5-million. The fair market value (FMV) of the painting at the time of the purchase was P1-million. The will also granted Zandro the power to appoint his wife.00 worth of stocks in Barack Motors Corporation. Is Miguel entitled to claim a dowry exclusion? Why or why not? (3%) b. (3%) XIV Emiliano Paupahan is engaged in the business of leasing out several residential apartment units he owns. a. XII YYY Corporation engaged the services of the Manananggol Law Firm in 2006 to defend the corporation's title over a property used in the business. against the assessment and submitted all relevant documents in support of the protest. he now plans to file an amended income tax return for 2007. Realizing that he has enough documents to substantiate his profession-connected expenses. 2009. (3%) b. 2000. filed his income tax return for 2007 claiming optional standard deductions. Johnny's 10-year old son. May the Commissioner legally enforce collection of the delinquent tax? Explain. Will Ernesto be allowed to amend his return? Why or why not? (4%) XVII A final assessment notice was issued by the BIR on June 13. Is the CTA correct in dismissing the petition for review? Explain your answer. naming in the trust instrument Santino. 2000. and received by the taxpayer on June 15. Is MFC . What advice will you give the trustee? Explain. The taxpayer protested the assessment on July 31. The trustee is instructed to distribute the yearly rentals amounting to P720. in the form of a request for reinvestigation. What remedy or remedies are available to the taxpayer? Explain. but was eventually denied by the Commissioner of Internal Revenue in a decision dated June 15. (4%) XIX Johnny transferred a valuable 10-door commercial apartment to a designated trustee. (4%) XVIII A taxpayer received an assessment notice from the BIR on February 3. since no audit has been commenced by the BIR on the return he previously filed.XVI Ernesto. a Filipino citizen and a practicing lawyer. as the sole beneficiary. 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%) XX Masarap Food Corporation (MFC) incurred substantial advertising expenses in order to protect its brand franchise for one of its line products. claiming it as an ordinary business expense. Miriam. The following day. The trustee consults you if she has to pay the annual income tax on the rentals received from the commercial apartment. The protest was initially given due course. the taxpayer. a. but the CTA dismissed the same. 2009. 2005. (4%) b. in order to claim itemized deductions. Assume that the CTA's decision dismissing the petition for review has become final. sought your advice.000. apprehensive because he had not yet received notice of a decision by the Commissioner on his protest. The taxpayer then filed a petition for review with the Court of Tax Appeals (CTA). On September 11. MFC included the advertising expense as deduction from gross income.00. a. he filed a protest. 2000. In its income tax return. WARNING: NOT FOR SALE OR UNAUTHORIZED USE TAXATION PART I . contained in six (6) pages. Write legibly. Do not repeat the question. contained in five (5) pages. for a total number of eleven (11) pages. (3%) -NOTHING FOLLOWS- BAR EXAMINATION 2010 TAXATION LAW 12 September 2010 2 P. an answer to a sub-question/s under the same number may be written continuously on the same page and succeeding pages until completed.correct? Explain. Write your answers to Part I and Part II in the corresponding portions indicated in the booklet. INSTRUCTIONS This questionnaire is in TWO (2) PARTS: Part I with nine (9) questions (numbered I to IX).M. Begin your answer to each numbered question on a separate page.M – 5 P. Answer the questions directly and concisely. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE GOOD LUCK!!! _____________________________________ CONCHITA CARPIO MORALES CHAIRPERSON 2010 BAR EXAMINATIONS COMMITTEE PLEASE CHECK THAT THIS SET CONTAINS ELEVEN (11) PAGES (INCLUDING THIS PAGE). and Part II with nine (9) questions (numbered X to XVIII). What is the "immediacy test"? Explain briefly.000.000.000. (1%) c.. In the Return. What is the basis for the computation of business tax on contractors under the Local Government Code? (2%) f.I True or False. What is the "rational basis" test? Explain briefly. What is the "all events test"? Explain briefly. Inc. (1%) II a. On April 15. Proceedings before the CTA in the exercise of its exclusive original jurisdiction are in the nature of trial de novo. (2%) d.00. What is the effect of the execution by a taxpayer of a "waiver of the statute of limitations" on his defense of prescription? (2%) e. In its 2009 Return. (1%) e. a domestic corporation. (2%) c.00 and its income tax overpayment for the prior year 2008 of P1.00 and indicated its choice to carry-over the overpayment as an automatic tax credit against its income tax liabilities in subsequent years. the corporation indicated its option to claim for refund the total income tax . Judgments. prescription is construed strictly against the government and liberally in favor of the taxpayer. (2%) b. which shall hear the cases en banc. In criminal cases where the Court of Tax Appeals (CTA) has exclusive original jurisdiction. (1%) b. resolutions or orders of the Regional Trial Court in the exercise of its original jurisdiction involving criminal offenses arising from violations of the NIRC are appealable to the CTA.000.000. prescription is construed strictly against the government. In civil cases involving the collection of internal revenue taxes. 2010. (1%) d. a. 2009. filed its Annual Income Tax Return for its taxable year 2008 on April 15. it filed its Annual Income Tax Return for its taxable year 2009 reflecting a taxable loss and an income tax overpayment for the current year 2009 in the amount of P500. it reflected an income tax overpayment of P1. In criminal cases involving tax offenses punishable under the National Internal Revenue Code (NIRC). How are retiring businesses taxed under the Local Government Code? (2%) III Mirador. the right to file a separate civil action for the recovery of taxes may be reserved. 2010.00 Choose which of the following statements is correct. 2010. Inc. b.00 representing its income tax overpayment for its taxable year 2009.000. (5%) V Does the Court of Appeals have the power to review compromise agreements forged by the Commissioner of Internal Revenue and a taxpayer? Explain. No amount may be claimed as refund. Mirador. or c. Is the CIR correct? Explain. 2010.000. 2010 issued by the Commissioner of Internal Revenue (CIR) for deficiency income tax for its taxable year 2008.00 reflected in its income tax return for its taxable year 2009. (4%) VII What are the conditions that must be complied with before the Court of Tax Appeals may suspend the collection of national internal revenue taxes? (3%) . Inc. may claim as refund the total income tax overpayment of P1. an Information for failure to file income tax return under Section 255 of the National Internal Revenue Code (NIRC) was filed by the Department of Justice (DOJ) with the Manila Regional Trial Court (RTC) against XX. It failed to protest the PAN. The CIR thereupon issued a final assessment notice (FAN) with letter of demand on April 30.000. a Manila resident. Continental. (5%) IV On March 10. 2010. the corporation having failed to protest the PAN. it filed its protest against it. It may claim as refund the amount of P500. Explain the basis of your answer. (5%) VI Based on the Affidavit of the Commissioner of Internal Revenue (CIR). Is a prior assessment necessary before an Information for violation of Section 255 of the NIRC could be filed in court? Explain.500. The FAN was received by the corporation on May 10. The CIR denied the protest on the ground that the assessment had already become final and executory. a.overpayment of P1. XX moved to quash the Information on the ground that the RTC has no jurisdiction in view of the absence of a formal deficiency tax assessment issued by the CIR. received a preliminary assessment notice (PAN) dated March 1. following which or on May 25.500. Informer’s reward is subject to a final withholding tax of 10%. On October 10. drawing it to file on October 25. 2009. h. (3%) PART II X True or False. A non-resident alien who stays in the Philippines for less than 180 days during the calendar .000.VIII What is the rule on appeal from decisions of the Collector of Customs in protest and seizure cases? When is the decision of the Collector of Customs appealable to the Court of Tax Appeals? Explain. if his tax due exceeds P2. (3%) b.500. The capitalization rules may be resorted to by the BIR in order to compel corporate taxpayers to declare dividends to their stockholders regularly. the corporation received a collection letter from the City Treasurer. 2009 an appeal against the assessment before the Pasay Regional Trial Court (RTC). f.000. 2009. (5%) IX On May 15. The Tax Code allows an individual taxpayer to pay in two equal installments. c. b. An individual taxpayer can adopt either the calendar or fiscal period for purposes of filing his income tax return. as the case may be. On June 30. 2009. the corporation contested the assessment by filing a written protest with the City Treasurer.500 per year may be deducted from gross income if his gross salary per year is not more than P250. Premium payment for health insurance of an individual who is an employee in an amount of P2. Gains realized by the investor upon redemption of shares of stock in a mutual fund company are exempt from income tax. (1% each) a. La Manga Trading Corporation received a deficiency business tax assessment of P1. a. d. the first installment to be paid at the time the return is filed. A corporation can claim the optional standard deduction equivalent to 40% of its gross sales or receipts. and the second on or before July 15 of the same year.000. Was the appeal with the Pasay RTC filed on time? Explain. g. Was the protest of the corporation filed on time? Explain.00 from the Pasay City Treasurer. e. of concrete barriers for the Asian Development Bank in Ortigas Center to prevent car bombs from ramming the ADB gates along ADB Avenue in Mandaluyong City. (3%) c. what is the applicable rate for each transaction. Can the City Government of Manila legally impose said levy on the corporation? Explain. (3%) . Its principal office in Quezon City is also a sales office. a. (3%) XII Ferremaro.year shall be entitled to personal exemption not to exceed the amount allowed to citizens of the Philippines by the country of which he is subject or citizen. The services are paid for in US$ and duly accounted for with the Bangko Sentral ng Pilipinas. Call Center operated by a domestic enterprise in Makati that handles exclusively the reservations of a hotel chain which are all located in North America. (3%) b. (3%) XIII XYZ Shipping Corporation is a branch of an international shipping line with voyages between Manila and the West Coast of the U. All the bills of lading and invoices are issued by the branch office in Makati which is also the company’s principal office. State the relevant authority/ies for your answer. Inc. It has branches/sales offices in Cebu and Davao. a manufacturer of handcrafted shoes. XI Are the following transactions subject to VAT? If yes. Its factory is located in Marikina City where most of its workers live.S. Sale of orchids by a flower shop which raises its flowers in Tagaytay. The company’s vessels load and unload cargoes at the Port of Manila. Construction by XYZ Construction Co. The City of Manila enacted an ordinance levying a 2% tax on gross receipts of shipping lines using the Port of Manila. maintains its principal office in Cubao.. Sales of finished products for calendar year 2009 in the amount of P10 million were made at the following locations: i) Cebu branch ii) Davao branch iii) Quezon City branch Total Where should the applicable local taxes on the shoes be paid? Explain. albeit it does not have a branch or sales office in Manila. Quezon City. (3%) XV Don Sebastian. the City Assessor issued an assessment against A for non-payment of real property taxes. Is the assessor justified in assessing A’s deficiency real property taxes? Explain.000 100.000. The following year.000 The expenses and charges on the estate are as follows: Funeral Expenses P 250. 2009.000 1. He left the following properties and interests: House and lot (family home) in Pasig Vacation house and lot in Florida. and resident of Pasig City. A group of Tibetan monks approached A and offered to lease the building in order to use it as a venue for their Buddhist rituals and ceremonies.000 Claims against the estate 300. single but head of the family.XIV A inherited a two-storey building in Makati from his father. died intestate on November 15.000. a real estate broker in the ‘60s.000 and liabilities of P100.500.000 1.000 Household furnitures and appliances 1. a domestic enterprise 100. Cavite which he inherited from his father Car which is being used by his brother in Cavite Proceeds of life insurance where he named his estate as irrevocable beneficiary P 800. Filipino.000 500.000 Medical expenses of last illness 600.000 2.000 Shares of stock in ABC Corp.000. A accepted the rental of P1 million for the whole year. USA Agricultural land in Naic.000 Claims against a cousin who has assets of P10.000 Legal fees for the settlement of the estate 500.000 The compulsory heirs of Don Sebastian approach you and seek your assistance in the settlement of . Would your answer in A. (3%) XVIII ABC. received dividend income from a U.5%) XVI A is a travelling salesman working full time for Nu Skin Products. (2. He receives a monthly salary plus 3% commission on his sales in a Southern province where he is based.S. Explain the legal basis of your tax advice. they request you to explain and discuss with them the following questions. withholding tax with respect to a non-resident alien like Caruso. is there any tax implication of X’s renunciation? What about the other coheirs? (2. immigrant in 2008 and had become a non-resident Filipino citizen? Explain the difference in treatment for Philippine income tax purposes. a non-resident foreign corporation based in the U.S. If X.S. U.5%) c. Discuss the tax implication of the transaction. (5%) . Under the agreement which the parties forged in the U. In consideration for such rights.5%) d. a. He regularly uses his own car to maximize his visits even to far flung areas. You oblige: a. What is the net taxable estate of the decedent? Explain. (2. Specifically. (3%) XVII In 2009. one of the compulsory heirs. What will be your advice to Caruso in order to lessen the impact of possible double taxation on the same income? (3%) b. entered into a software license agreement with XYZ. a domestic corporation.-based corporation which owns a chain of Filipino restaurants in the West Coast. When is the due date for filing and payment of the applicable tax return and tax? Are these dates extendible? If so. He was notified the following day by the police that the marines and the militants had a bloody encounter and his car was completely destroyed after a grenade hit it. renounces his share in the inheritance in favor of the other co-heirs.S. under what conditions or requirements? (2. A wants to file a claim for casualty loss. a resident Filipino citizen..A. XYZ granted ABC the right to use a computer system program and to avail of technical know-how relative to such program.S. The dividend remitted to Caruso is subject to U. be the same if Caruso became a U. Caruso.his estate for which they have agreed to the above-stated professional fees. One fine day a group of militants seized his car.5%) b. What are the properties and interests that should be included in the computation of the gross estate of the decedent? Explain.S. ABC agreed to pay 5% of the revenues it receives from customers who will use and apply the program in the Philippines. building. (D) transaction that is the source of the income is consummated. Aside from claiming that the law adversely affects her since she sends messages by text. (2) Anne Lapada. . (B) income has been actually received in money or its equivalent. either actually or constructively. (C) the DILG authorizes it to do so. (C) income has been received. a student activist. wants to impugn the validity of a tax on text messages.NOTHING FOLLOWS. Bar Examination Questionnaire for Taxation Law Set A (1) A municipality may levy an annual ad valorem tax on real property such as land. (B) That tax money is being extracted and spent in violation of the constitutionally guaranteed right to freedom of communication. machinery. (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. (B) the real property is located in the municipality. Taxable income is recognized when the (A) taxpayer fails to include the income in his income tax return. (D) the power is delegated to it by the province. (3) There is no taxable income until such income is recognized. 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 collected from her in case the court nullifies the tax measure. and other improvement only if (A) the real property is within the Metropolitan Manila Area. issue the release papers of the shipment yet since the Food and Drug Administration (FDA) needed to test the suitability of the wine for human consumption. (C) It shall pay 5% tax on the first P100.00. a Philippine corporation. the Bureau of Customs is estopped from holding the release of the shipment after receiving the payment.000. however.00 and 10% tax on the remaining P100. resulting in its destruction? (A) Power to destroy theory (B) Lifeblood theory (C) Sumptuary theory (D) Symbiotic doctrine .00. immediately paid. Inc. deducting its cost of acquisition as an expense. (D) It shall pay a tax of one-half of 1% of the P2 million gross sales. imported 100 cases of Marula wine from South Africa.000 PLDT shares that it bought 2 years ago.000. The shipment was assessed duties and value-added taxes of P300. because the Bureau of Customs has not yer issued the legal permit for withdrawal pending the FDA's findings. Inc. because the importation was already terminated as a result of the payment of the taxes due. Keyrand sold the shares for P2 million and realized a net gain of P200. Inc.000.000. a government would be paralyzed for lack of power to activate and operate it.00 in its corporate income tax return adjusted by the holding period... (6) Which theory in taxation states that without taxes. if the amount paid as duties and value-added taxes due on the importation was insufficient. (B) Yes.(4) Keyrand. (C) No. (B) It shall report the P200. How shall it pay tax on the transaction? (A) It shall declare a P2 million gross income in its income tax return.000 which Amaretto. (D) No.00 of the P200. sold through the local stock exchange 10. Is the Bureau of Customs at fault for refusing to release the shipment just as yet? (A) Yes. The Bureau of Customs did not. (5) Amaretto.000. a compensation income earner.00 each in 2012. (C) violates the right to equal protection. (B) does not violate substantive due process. Then. 2011. Since the 3-year prescriptive period started to run on March 30. 2011.00 each year from 2011 to 2015.00 in 2012. hence. 2014 and 2015. it already expired by May 20. it has not yet expired on April 10. 2013. (D) Yes. 2008.(7) The spouses Helena and Federico wanted to donate a parcel of land to their son Dondon who is getting married in December. 2008. The 3 year prescriptive period started to run on April 15. (C) No. hence. 2008. Can Mia raise the defense of prescription? (A) No.000. Helena should donate the remaining P20. (B) Spread the donation over a period of 5 years by the spouses donating P100.00 portion of the value of the property in 2011. 2008.000. On May 20. 2008. Mia received an assessment notice and letter of demand covering the taxable year 2007 but the postmark on the envelope shows April 10. 2011. 2011.000.00. 2011. 2011. The prescriptive period started to run on March 30.00 then spread the P400.000. In this sense.000. 2011.00 portion of the value of the property in 2011 then each should donate P100. (C) The spouses should each donate a P110.000. and another P100.00 equally for 2012. (B) Yes. (D) The spouses should each donate a P100. Her return is not a false and fraudulent return. filed her income tax return for the taxable year 2007 on March 30. hence. in 2013. (9) Double taxation in its general sense means taxing the same subject twice during the same taxing period. . it had already expired by May 20.000. The parcel of land has a zonal valuation of P420.000. (D) does not violate the right to equal protection. The 3 year prescriptive period started to run on April 15. What is the most efficient mode of donating the property? (A) The spouses should first donate in 2011 a portion of the property valued at P20.00.000. the 3 year period expired on April 10. (8) Mia. double taxation (A) violates substantive due process. (13) Anktryd. (D) a deduction in the recipient's income tax return. (D) Royalties from the use in Brazil of generator sets designed in the Philippines by its engineers. and taxes. has a 50 MW electric power plant in San Jose. which among the following is considered as part of its income from sources within the Philippines? (A) Gains from the sale to an Ilocos Norte power plant of generators bought from the United States. Inc. In the same year. Tong's gross estate for Philippine estate tax purposes is (A) P20 billion. bought a parcel of land in 2009 for P7 million as part of its inventory of real properties. (C) P100 billion. These were the only transactions it had in its real estate business. (12) Tong Siok. losses. a Chinese billionaire and a Canadian resident.. The withholding of the tax has the effect of (A) a final settlement of the tax liability on the income. (11) Guidant Resources Corporation. it incurred a loss of P6 million for selling another parcel of land in its inventory. Batangas. (C) Dividends from a two-year old Norwegian subsidiary with operations in Zambia but derives 60% of its gross income from the Philippines. and the share of his surviving spouse in their conjugal partnership amounted to P15 billion. In 2010. died and left assets in China valued at P80 billion and in the Philippines assets valued at P20 billion. indebtedness. For Philippine estate tax purposes the allowable deductions for expenses. (C) consummating the transaction resulting in an income. (B) P5 billion.(10) The payor of passive income subject to final tax is required to withhold the tax from the payment due the recipient. (B) a credit from the recipient's income tax liability. Aside from Guidant's income from its power plant. (D) P85 billion. property previously taxed. it sold the land for P12 million which was its zonal valuation. (B) Interests earned on its dollar deposits in a Philippine bank under the Expanded Foreign Currency Deposit System. Which of the following is the applicable tax treatment? . transfers for public use. a corporation registered in Norway. (B) Yes. The BIR compiled a record of all the imports of Kim from Aplets and imposed a tax on Aplets net income derived from its exports to Kim. Inc. because the taxpayer is not shown to be a publicly-listed corporation. Is the BIR correct? (A) Yes. (C) No. (D) Anktryd's P6 million loss could not be deducted from its P5 million gain. (C) Anktryd's gain of P5 million shall be subject to the holding period. (14) Aplets Corporation is registered under the laws of the Virgin Islands. Aplets is doing business in the Philippines through its exclusive distributor Kim's Trading. Inc. or an insurance company. (15) In 2009. Its products are imported and sold at a mark-up by its exclusive distributor. Inc. And it has no proposed capital expenditures for 2011 and the immediate future. Aplets is a non-resident foreign corporation engaged in trade or business in the Philippines. (16) The actual effort exerted by the government to effect the exaction of what is due from the taxpayer is known as . Spratz. It did not declare dividends for 2009 and 2010.’s net profit before tax was P35 million while its operating expenses was P31 million. (D) Yes. In 2010. (B) Anktryd could deduct its P6 million loss from its P5 million gain. (C) No. It has extensive operations in Southeast Asia. since the accumulated amounts are reasonable for operations in relation to what it usually needed annually. In the Philippines. because there is no showing that the taxpayer's 2009 and 2010 net profit before tax exceeded its paid-up capital. a bank. since the accumulation is not reasonably necessary for the immediate needs of the business. Aplets is a non-resident foreign corporation not engaged in trade or business in the Philippines. Kim's Trading. its net profit before tax was P40 million and its operating expenses was P38 million. The tax should have been computed on the basis of gross revenues and not net income. (B) No. May Spratz be subject to the improperly accumulated tax on its retained profits for 2009 and 2010? (A) Yes.(A) Anktryd shall be subject to a tax of 6% of P12 million. (D) No. (18) Passive income includes income derived from an activity in which the earner does not have any substantial participation. (D) collection.00 as income from her beauty parlor and received P250. . (C) identify who should collect the tax. it is NOT the function of Congress to (A) fix with certainty the amount of taxes.000. For tax purposes. (17) Although the power of taxation is basically legislative in character.00. (B) exempt from income taxation.00 as Christmas gift from her spinster aunt.000.000.000. (19) In 2010. (C) P350.000. (B) levy. (D) determine who should be subject to the tax. (B) P500.00. (C) payment.00 for the operation of her beauty parlor. (20) Exempted from donor’s taxation are gifts made (A) for the use of the barangay.000. her gross income for 2010 is (A) P750. (B) collect the tax levied under the law. (C) taxable only if earned by a citizen.00.(A) assessment. She had no other receipts for the year. (D) included in the income tax return. This type of income is (A) usually subject to a final tax. She spent P150.00. Juliet Ulbod earned P500.000. (D) P600. He should pay his Philippine income taxes on (A) the gains derived from the sale in California. U. (B) it simultaneously seeks BIR approval of its new accounting period.(B) in consideration of marriage. (D) amusement tax on boxing exhibitions. (B) the proceeds he received from a Philippine insurance company as the sole beneficiary of life insurance taken by his father who died recently. (C) value-added tax on certain articles. (D) its constitution and by-laws authorizes the change. (C) the gains derived from the sale in the New York Stock Exchange of shares of stock in PLDT. (B) excise tax on petroleum products. a Philippine corporation. (24) What is the rule on the taxability of income that a government educational institution derives from its school operations? Such income is (A) subject to 10% tax on its net taxable income as if it is a proprietary educational institution.A. (21) Federico. provided (A) it seeks prior BIR approval of its proposed change in accounting period. (C) to a school which is a stock corporation. a Filipino citizen. . (23) A corporation may change its taxable year to calendar or fiscal year in filing its annual income tax return. (D) dividends received from a two year old foreign corporation whose gross income was derived solely from Philippine sources. of jewelry he purchased in the Philippines. migrated to the United States some six years ago and got a permanent resident status or green card.S. (D) to a for-profit government corporation. (22) An example of a tax where the concept of progressivity finds application is the (A) income tax on individuals. (C) it should change its accounting period two years prior to changing its taxable year. . (25) Which among the following reduces the gross estate (not the net estate) of a citizen of the Philippines for purposes of estate taxation? (A) Transfers for public use (B) Property previously taxed (C) Standard deduction of P1 million (D) Capital of the surviving spouse (26) Ka Pedring Matibag. his taxable quarters end on the last day of March. directly. June. a sole proprietor. June. and exclusively used for educational purposes. In September 2011. June and July 2011 vodka imports because it discovered that his net retail price for the vodka was P250 per bottle from January to September 2011. (C) subject to the ordinary income tax rates with respect to incomes derived from educational activities. Does the retroactive application of the revocation violate Clemen's right to due process as a taxpayer? (A) Yes. because he acted in bad faith when he claimed a lower net retail price than what he actually used. and December. and July 2011. This ruling was applied to his imports for May. Since he is using the calendar year as his taxable year. since the presumption is that the BIR ascertained the facts before it made its ruling. (D) Exempt from income taxation in the same manner as government-owned and controlled corporations. buys and sells "kumot at kulambo" both of which are subject to value-added tax. When should Ka Pedring file the VAT quarterly return for his gross sales or receipts for the period of June 1 to September 30? (A) Within 25 days from September 30 (B) Within 45 days from September 30 (C) Within 15 days from September 30 (D) Within 30 days from September 30 (27) In January 2011. (B) No. September. 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. the BIR revoked its ruling and assessed him for deficiency taxes respecting his May.(B) Exempt from income taxation if it is actually. He named his compadre. a French citizen permanently residing in the Philippines. to be the administrator of the estate.000. (C) the corporate taxpayer has no other uncollected tax liability. As a result of the resignation. In his will. Which among the following is NOT subject to Philippine income taxation? . (D) The person designated by the will as the one liable. he left his estate of P100 million to his four children. executory. (C) All the four children. (30) The BIR could not avail itself of the remedy of levy and distraint to implement. (B) 30 days. he resigned as administrator. who may be held liable for the payment of the estate tax? (A) Don Epitacio since the tax became due prior to his resignation. a widower. When the BIR sent a demand letter to Don Epitacio for the payment of the estate tax. through collection. 2011 should Esperanza respond to the notice? (A) 180 days. (28) Don Fortunato. Forthwith. since he had already acquired a vested right in the favorable BIR ruling. 2011.00 deficiency income taxes on her 2009 income. (D) 15 days. Don Epitacio. since he could avail of remedies available for disputing the assessment. (31) Alain Descartes. and demandable where (A) the subject of the assessment is an income tax. (B) The eldest child who would be reimbursed by the others. 2011.(C) No. (C) 60 days. the tax to be divided equally among them. How many days from July 31. he refused to pay claiming that he did not benefit from the estate. Esperanza received a preliminary assessment notice from the BIR demanding that she pays P180. (B) the amount of the tax involved does not exceed P100. (D) Yes. died in May.00. an assessment that has become final. (29) On July 31. (D) the taxpayer is an individual compensation income earner. received several items during the taxable year. he not being an heir. (33) Which among the following circumstances negates the prima facie presumption of correctness of a BIR assessment? (A) The BIR assessment was seasonably protested within 30 days from receipt. 2005. arbitrary. it did not do anything anymore. On April 15. 2005. (C) Proof that the assessment is utterly without foundation. (B) Interests from his deposits in a local bank of foreign currency earned abroad converted to Philippine pesos. (32) Income is considered realized for tax purposes when (A) it is recognized as revenue under accounting standards even if the law does not do so. (B) No preliminary assessment notice was issued prior to the assessment notice. (D) the earning process is complete or virtually complete and an exchange has taken place. Was the BIR action proper? (A) Yes. The taxpayer did not apply for a compromise. 2010 the BIR garnished the corporation's bank deposits to answer for the tax liability. On June 2. Inc.(A) Consultancy fees received for designing a computer program and installing the same in the Shanghai facility of a Chinese firm. received a notice of assessment and a letter of demand on its April 15. (B) Yes. . 2005 Miguel Foods. and capricious. The BIR has 5 years from the issuance of the final assessment within which to collect. (C) Dividends received from an American corporation which derived 60% of its annual gross receipts from Philippine sources for the past 7 years. 2002 final adjustment return from the BIR. (C) the taxpayer has been paid and has received in cash or near cash the taxable income. Taguig City to another resident alien. Miguel Foods then filed a request for reinvestigation together with the requisite supporting documents on April 25. The BIR has 5 years from the filing of the protest within which to collect. (34) On March 30. Since Miguel Foods was satisfied with the reduction. (D) Gains derived from the sale of his condominium unit located in The Fort. (C) No. (D) The BIR did not include a formal letter of demand to pay the alleged deficiency. the BIR issued a final assessment reducing the amount of the tax demanded. (B) the taxpayer retires from the business without approval from the BIR. (D) Joint account (cuentas en participacion) engaged in the trading of mineral ores. (37) Gerardo died on July 31. personal. Spanflex still has not elevated the matter to the CTA. (36) Spanflex Int’l Inc. (38) Income from dealings in property (real. 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. 2011. (D) None. the BIR action violated the Bank Deposit Secrecy Law. Thirty days from the lapse of 180 days from the filing of its protest. 2011. What remedy. if any. 2011.(D) No. It seasonably filed a protest with all the necessary supporting documents but the BIR failed to act on the protest. (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. . (C) six months from the time he died on July 31. (B) Joint-stock company formed for the purpose of undertaking construction projects. (C) Business partnership engaged in energy operations under a service contract with the government. (B) sixty days from the appointment of an administrator. (35) 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 civil engineering. (D) sixty days from the time he died on July 31. or mixed) is the gain or loss derived (A) only from the cash sales of property. (B) from cash and gratuitous receipts of property. His estate tax return should be filed within (A) six months from filing of the notice of death. received a notice of assessment from the BIR. Its right to appeal to the CTA has prescribed. Without the taxpayer’s prior authority. Inc. She used the P1. (D) Tonette may not deduct her 2009 loss from both her 2010 professional income and her gain.25 million incurring a loss of P250. (C) gratuitously allows its use for educational purposes by a school established for profit.00. and a brooch for P500. bracelet. and necklace for only P1. Tonette sold her diamond ring. bought a diamond ring for P750.000.(C) from sale and lease of property. Tonette. (D) Anion must immediately deposit the P500. (C) Anion must waive its right to the secrecy of its bank deposits. (B) Tonette may carry over and deduct her 2009 loss only from her 2010 gain. a bracelet for P250.5 million in September 2010.? (A) Anion must show it has faithfully paid taxes before 2009. who is fond of jewelries.00. (D) only from the sale of property. The financial statements of the company show that it has been suffering financial reverses from the year 2009 up to the present.00.000. Tonette had no other transaction in jewelry in 2010.00.00 with the BIR. Inc.00 which it offered as a compromise to the BIR.000. (41) Real property owned by the national government is exempt from real property taxation unless the national government (A) transfers it for the use of a local government unit. In October 2009. (40) Anion.00. a necklace for P500. Which among the following describes the tax implications arising from the above transactions? (A) Tonette may deduct his 2009 loss only from her 2009 professional income.000.000. Tonette derives income from the exercise of her profession as a licensed CPA. Which among the following may the BIR require to enable it to enter into a compromise with Anion. (39) In March 2009. (C) Tonette may carry over and deduct her 2009 loss from her 2010 professional income as well as from her gain. (B) leases the real property to a business establishment. (B) Anion must promise to pay its deficiency when financially able.25 million to buy a solo diamond ring in November 2009 which she sold for P1.000.000. . 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. Its asset position shows that it could pay only P500. . 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. (C) is not suspended because only final decisions of the BIR are subject to appeal. (B) fiscal adequacy. (C) since they do not help earn the income from which they are to be deducted. (C) Three children. with Dondon directed to provide full financial support for them as well. The court awarded custody of two of the children to Dondon and three to Helena. (45) Real property taxes should not disregard increases in the value of real property occurring over a long period of time. (D) Two children. (D) is not suspended since the continued existence of government depends on tax revenues. (42) Dondon and Helena were legally separated. (B) if the candidate supported wins the election because of possible corruption.(D) sells the property to a government-owned non-profit corporation. They had six minor children. all qualified to be claimed as additional exemptions for income tax purposes. the BIR's power to garnish the taxpayer's bank deposits (A) is suspended to await the finality of such decision. (B) is suspended given that the CTA can reverse BIR decisions when prejudicial to the taxpayer. (B) Five children. To do otherwise would violate the canon of a sound tax system referred to as (A) theoretical justice. The court awarded the 6th child to Dondon's father with Dondon also providing full financial support. (44) When a BIR decision affirming an assessment is appealed to the CTA. (43) Political campaign contributions are NOT deductible from gross income (A) if they are not reported to the Commission on Elections. (D) since such amounts are not considered as income of the candidate to whom given. (D) No. Tax laws should always be enforced because without taxes the very existence of the State is endangered. (49) As a general rule. Is this always so? (A) No. property rights are not affected. (D) only when there is an approval of the National Evaluation Board. (48) Zygomite Minerals. (47) Jeopardy assessment is a valid ground to compromise a tax liability (A) involving deficiency income taxes only. The Supreme Court may nullify a tax law. The Executive Branch may decide not to enforce a tax law which it believes to be confiscatory. (C) Yes. (D) interests derived from its dollar deposits in a Philippine bank under the Expanded Foreign Currency Deposit System. The tax collectors should enforce a tax law even if it results to the destruction of the property rights of a taxpayer. (B) gains it derived from sale in Australia of shares of stock of Philex Mining Corporation. Inc. (D) symbiotic relationship. but not for other taxes. 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 days from receipt of the Commissioner’s denial of his application for refund. hence. (B) because of doubt as to the validity of the assessment. (46) The power to tax is the power to destroy. (C) dividends earned from investment in a foreign corporation that derived 40% of its gross income from Philippine sources. (C) if the compromise amount does not exceed 10% of the basic tax. ..(C) administrative feasibility. (B) Yes. not operating in the Philippines. a corporation registered and holding office in Australia. a Philippine corporation. may be subject to Philippine income taxation on (A) gains it derived from sale in Australia of an ore crusher it bought from the Philippines with the proceeds converted to pesos. .00 donation. What is the donor's tax implication on Celia’s donation? (A) The P100. (52) Levox Corporation wanted to donate P5 million as prize money for the world professional billiard championship to be held in the Philippines. (C) Within 2 years from payment of the income taxes sought to be refunded.000. (C) 100% of the actual project cost.000. (C) No. (D) Within 30 days from receipt of the denial or within two years from payment. Is Levox subject to the donor's tax on its donation? (A) No. (B) 100% of the actual project cost without giving any portion to the barangay.000.000.000.00 portion of the donation is exempt under the rate schedule for donor's tax. (B) Yes. the Sangguniang Panglalawigan may impose a special levy upon the lands specifically benefitted by the road up to an amount not to exceed (A) 60% of the actual cost of the road without giving any portion to the barangay. keeping 60% for the province and giving 40% to the barangay. (B) A P10.00 to her friend Victoria who was getting married. since the national sports association for billiards does not sanction the event. (D) The P100. (50) After the province has constructed a barangay road. (C) Celia shall pay a 30% donor's tax on the P110. Since the Billiard Sports Confederation of the Philippines does not recognize the event. it was held under the auspices of the International Professional Billiards Association. (D) 60% of the actual cost. so long as the donated money goes directly to the winners and not through the association. (51) Celia donated P110. because it is donated as prize for an international competition under the billiards association.(B) Within 30 days from receipt of the denial which must not exceed 2 years from payment of income tax.00 portion of the donation is exempt being a donation in consideration of marriage. dividing the same between the province and the barangay. Celia gave no other gift during the calendar year.00 portion of the donation is exempt since given in consideration of marriage. Inc. resulting in failure to recruit welltrained administrative personnel to effectively manage the school. since the donation is actually. Don Leon donated P100 million pesos to the school. (B) pay the customs duties and taxes or to comply with the rules on customs procedures. since he did not obtain the requisite NGO certification before he made the donation. (C) pay the customs duties and taxes.00 of total Levox donations for the calendar year. (B) The BIR could already enforce the collection of the taxpayer's liability if it could secure authority from the CTA. The donation represents less than 10% of Don Leon's taxable income for the year. In 2010. non-profit school always had cash flow problems. (53) A violation of the tariff and customs laws is the failure to (A) pay the customs duties and taxes and to comply with the rules on customs procedures. (D) No. .(D) Yes. Is he subject to donor's taxes? (A) No. wages. (C) The taxpayer's liability becomes fixed and subject to collection as the assessment becomes final and collectible. directly. and exclusively used for educational purposes. because the donation is to be wholly used for administration purposes. (56) What is the tax base for the imposition by the province of professional taxes? (A) That which Congress determined. (C) Yes. (D) comply with the rules on customs procedures.000. because the donation does not exceed 10% of his taxable income for 2010. and benefits of administrative personnel. (55) A non-stock. provided the money shall be used solely for paying the salaries. (54) 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 Commissioner on the matter. (B) Yes. (D) The taxpayer's liability remains suspended for 180 days from the expiration of the period to protest. but only that part that exceeds the first P100. (C) where payment is made as a result of the death of the insured.(B) The pertinent provision of the local Government Code. (D) where the beneficiary was not the one who took out the endowment contract. (57) There is prima facie evidence of a false or fraudulent return where the (A) tax return was amended after a notice of assessment was issued. (C) The reasonable classification made by the provincial sanggunian. (D) That which the Dept. (58) The proceeds received under a life insurance endowment contract is NOT considered part of gross income (A) if it is so stated in the life insurance endowment policy. (D) NOLCO. (D) deductions claimed exceed by 30% the actual deductions. (59) The excess of allowable deductions over gross income of the business in a taxable year is known as (A) net operating loss. (B) tax return was filed beyond the reglementary period. (C) net deductible loss. of Interior and Local Government determined. . (C) taxpayer changed his address without notifying the BIR. (B) if there was a failure to pay the deficiency tax within 60 days from BIR demand. (C) if the Regional Trial Court issues a writ of preliminary injunction to enjoin the BIR. (B) if the price for the endowment policy was not fully paid. (B) ordinary loss. (60) 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 fraudulent return. (D) bank if the shipment is covered by a letter of credit. because exemptions are strictly construed against the importer who is the taxpayer. (D) Yes. (B) No. as agricultural. because there is no basis for imposing duties on articles previously exported from the Philippines. consumer's cooperatives registered under the Cooperative Development Act enjoyed exemption from all taxes imposed by a local government. (C) shipping company in case the freight was not paid. In 1990. because all articles that are imported from any foreign country are subject to duty. (61) Is an article previously exported from the Philippines subject to the payment of customs duties? (A) Yes. (C) Yes. With the Local Government Code’s withdrawal of exemptions. the exemption has been withdrawn to level the playing field for all taxpayers and preserve the LGUs' financial position. (B) insurance company that covered the shipment. (62) Prior to the enactment of the Local Government Code.(D) attributable to the undisputed issues in the assessment notice. abandoned imported articles becomes the property of the (A) government whatever be the circumstances. (C) No. because the Local Government Code. he used the land for a poultry feed processing plant but continued to declare the property as agricultural. a general law. Congress has not by the majority vote of all its members granted exemption to consumers' cooperatives. (63) Under the Tariff and Customs Code. (64) Ka Tato owns a parcel of land in San Jose. Batangas declared for real property taxation. the local tax assessor discovered Ka Tato’s change of use of his land and informed the local treasurer who demanded payment of deficiency real property taxes from 1990 to 2011. if it is covered by a certificate of identification and has not been improved in value. their exemption is specifically mentioned among those not withdrawn by the Local Government Code. could these cooperatives continue to enjoy such exemption? (A) Yes. Has the action prescribed? . (D) No. (B) No. In March 2011. could not amend a special law such as the Cooperative Development Act. (C) Yes. directly. hence the right to collect the deficiency taxes has prescribed. Is the leased portion subject to real property tax? (A) Yes. (B) No. (C) No.500 sq. since the school actually. and exclusively used the rents for the maintenance of its school buildings. directly. 2010 and continued to live and engage in business in the Philippines. a Frenchman. He earned during his stay in the Philippines a gross income of P3 million from his investments in the country.. Pierre’s taxable status is that of (A) a non-resident alien not engaged in trade or business in the Philippines. the deficiency taxes may be collected within five years from when they fell due. More than 10 years had lapsed for the period 1990 up to 2000. The deficiency taxes for the period 1990 up to 2011 may still be collected within 10 years from March 2011. More than 5 years had lapsed for the collection of the deficiency taxes for the period 1990 up to 2005. The school actually. 2011 when he returned to France. Inc. What should be done in such instance to avoid an injustice? (A) Question the legality of the no-refund rule before the Supreme Court. decided to lease for commercial use a 1. since Lualhati is a stock and for profit educational institution. (B) a non-resident alien engaged in trade or business in the Philippines. 2010 and stayed until April 15. directly. (B) No. since the leased portion is not actually. . (D) Yes. For the year 2010. and exclusively used for educational purposes.(A) No. a stock educational institution organized for profit. He returned to the Philippines on November 6. including payment of janitorial services. (D) a resident alien engaged in trade or business in the Philippines. arrived in the Philippines on January 1. 2010. He went on a tour of Southeast Asia from August 1 to November 5. (D) Yes. but it may be subject to income taxation on the rents it receives. and exclusively used the rents for educational purposes. (66) Lualhati Educational Foundation. (C) a resident alien not engaged in trade or business in the Philippines. (67) 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 provincial or city assessor. m. portion of its school. (65) Pierre de Savigny. (71) The taxpayer seasonably filed his protest together with all the supporting documents. (70) Discriminatory duties may NOT be imposed upon articles (A) wholly manufactured in the discriminating country but carried by vessels of another country. (D) not manufactured in the discriminating country and carried by vessels of another country. (D) it is part of a lawmaker’s pork barrel. or 180 days from submission of the protest but the BIR Commissioner has not . (D) Issue a notice of constructive distraint to protect government interest. (69) Money collected from taxation shall not be paid to any religious dignitary EXCEPT when (A) the religious dignitary is assigned to the Philippine Army. (C) Subsequent adjustment in tax computation and the application of the excess payment to future real property tax liabilities. (B) Immediately conduct an investigation of the taxpayer's activities. (B) it is paid by a local government unit. (C) partly manufactured in the discriminating country but carried by vessels of another country. (D) Pass a new ordinance providing for the refund of real property taxes that have been erroneously or illegally collected.(B) Enact a new ordinance amending the erroneous or illegal assessment to correct the error. It is already July 31. (C) the payment is passed in audit by the COA. (B) not manufactured in the discriminating country but carried by vessels of such country. (C) Issue a jeopardy assessment coupled with a letter of demand. 2011. exemptions or credits? (A) Call the taxpayer to a conference to explain the delay. (68) 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 complied with the BIR requirements for the production of books of accounts and other records to substantiate the claimed deductions. 2011." the BIR temporarily closed business establishments. (D) August 1. and administrative penalties (B) Civil and criminal penalties (C) Civil and administrative penalties (D) Criminal and administrative penalties (73) Which among the following concepts of taxation is the basis for the situs of income taxation? (A) Lifeblood doctrine of taxation (B) Symbiotic relation in taxation (C) Compensatory purpose of taxation (D) Sumptuary purpose of taxation (74) In "Operation Kandado. 2011. 2011. (C) August 15. (B) August 30. The contention may be rejected if the BIR investigation reveals that (A) the taxpayer has not been regularly filing its income tax returns for the past 4 years. (72) Which of the following are NOT usually imposed when there is a tax amnesty? (A) Civil. (B) the taxpayer deliberately filed a false and fraudulent return with deliberate intention to evade taxes. including New Dynasty Corporation that failed to comply with VAT regulations.yet decided his protest. it faithfully issued VAT receipts. . and filed the proper VAT returns. criminal. 2011. Desirous of an early resolution of his protested assessment. New Dynasty contends that it should not be temporarily closed since it has a valid and existing VAT registration. the taxpayer should file his appeal to the Court of Tax Appeals not later than (A) August 31. (D) there was an understatement of taxable sales or receipts by 30% or more for the taxable quarter. (C) the taxpayer used falsified documents to support its application for refund of taxes. 2012 BAR EXAMINATIONS TAXATION LAW 14 October 2012 2:00 P. . HAND IN YOUR ANSWER SHEET.3:30 P. Do not make unnecessary marks on it. Keep the Answer Sheet clean. roll. The sect used the rentals for the support and upkeep of its priests. not the land. Set A MULTIPLE CHOICE QUESTIONS (MCQs) INSTRUCTIONS The following questionnaire consists of seventy-five (75) MCQs numbered 1 up to 75 contained in TWENTY TWO (22) pages. Do not explain your answer in the MCQ portion of the exam. that is used for religious purposes.000 sq.(75) The head priest of the religious sect Tres Personas Solo Dios. and exclusively used for educational purposes. Answer each question on the MCQ Answer Sheet by shading completely the appropriate circle corresponding to the letter you have chosen. directly. as the corporation sole. (D) exempt from real property taxes since it is actually. (Read the Marking Instruction on the Answer Sheet) Avoid erasures on the Answer Sheet. scratch. and exclusively used for religious purposes. (C) not exempt from real property taxes since it is the rents. crumple or tear it. You will not earn credit for that. m.M. Do not fold. The rented lot is (A) not exempt from real property taxes because the user is organized for profit. erase completely the answer you want to change. (B) exempt from real property taxes since it is actually. . rented out a 5. THERE IS NO NEED TO RETURN THIS QUESTIONNAIRE TO THE HEAD WATCHER. lot registered in its name for use as school site of a school organized for profit. directly.M. Provide ample time to transfer the answers if you choose to do this. If you need to make corrections. You may write on the questionnaire and use it as scratch paper but make sure to transfer your Answer Sheet. Answer first the MCQs completely before going to the essay-type questions. while the gross receipts tax is on the interest income received by Bank A from loans to its debtor-customers (active income). Chairperson 2012 Bar Examinations Committee PLEASE CHECK THAT THIS SET CONTAINS TWENTY THREE (23) PAGES (INCLUDING THIS PAGE). JR. 2. Which of the following statement is NOT correct? a) In case of doubt. c) The reversal of a ruling shall not generally be given retroactive application. while the second tax is business tax. At the same time. Bank A deposit money with Bank B which earns interest that is subjected to the 20% final withholding tax. statutes levying taxes are constructed strictly the government. b) The construction of a statute made by his predecessors is not binding upon the successor. while GRT on interest income on loan transaction is an tax. if thereafter he becomes satisfied that a different construction should be given.GOODLUCK!!! _____________________________________ MARTIN S. Which statement below expresses the lifeblood theory? a) The assessed taxes must be enforced by the government. 3. WARNING: NOT FOR SALE OR UNAUTHORIZED USE 1. Which statement below INCORRECTLY describes the transaction? a) There is double taxation because two taxes – income tax and gross receipts tax are imposed on the interest incomes described above and double taxation is prohibited under the 1987 Constitution b) There is no double taxation because the first tax is income tax. d) Income tax on interest income of deposits of Bank A is a direct tax. c) There is no double taxation because the income tax is on the interest income of Bank A on its deposits with Bank B (passive income). Bank A is subjected to the 5% gross receipts tax on its interest income on loan transactions to customers. d) A memorandum circular promulgated by the CIR that imposes penalty for violations of certain rules need not be published in a newspaper of general circulation or official gazette because it has the force and effect of law. if said reversal will be prejudicial to the taxpayer. . VILLARAMA. 5. c) The money contributed as tax becomes part of the public funds. for without taxation. d) The power of tax is subject to certain constitutional limitations. c) The service is actually performed in the Philippines. The Philippines adopted the semi-global tax system. d) The power of taxation is an inherent power of the sovereign to impose burdens upon subjects and objects within its jurisdiction for the purpose of raising revenues. 6. and public utilities. 7. d) All taxable incomes from sources within and without the Philippines are liable to income tax. For income tax purposes. b) All incomes subject to final withholding taxes liable to income tax under the schedular tax system. Which statement is WRONG? a) The power of taxation may be exercised by the government. United Kingdom. 4. are added together to arrive at gross income. the source of the service income is important for the taxpayer. d) The recipient of service income is a resident of the Philippines. c) Taxation is an arbitrary method of exaction by those who are in the seat of power. b) Generally. b) The contract calling for the performance of services is signed in the Philippines. there is no limit on the amount of tax that may be imposed. . which means that: a) All taxable incomes. if: a) The payment of compensation for the service is made in the Philippines. while all ordinary income as well as income not subject to final withholding tax under the global tax system. and all allowable deductions are deducted from the gross income to arrive at the taxable income. its political subdivisions. b) Non-resident Filipino citizen working residing in London. regardless of the nature of income. Income from the performance of services is treated as income from within the Philippines. who is a: a) Filipino citizen residing in Makati City. a government can neither exist nor endure.b) The underlying basis of taxation is government necessity. c) All taxable incomes are subject to final withholding taxes under the schedular tax system. 10. who is a real estate dealer. d) Organized under the laws of a foreign country that engages in business in Makati City.00. whichever is higher. b) Subject to the 20% final withholding tax.5% final withholding tax. 8. The sale is subject to income tax as follows: a) 6% capital gains tax on the gain. The gain is: a) Taxable at 30% regular corporate income tax based on net taxable income. . whichever is higher d) Exempt from income tax 11. Pihlippines. A resident corporation is one that is: a) Organized under the laws of the Philippines that does business in another country. c) Subject to the 7. 9. c) Organized under the laws of the Philippines that engages business in a special economic zone. b) Organized under the laws of a foreign country that sets up a regional headquarter in the Philippines doing product promotion and information dissemination.00).000.00 and cost is P800.c) Japanese citizen who is married to a Filipino citizen and residing in their family home located Fort Bonifacio. sold a residential lot in Quezon City at a gain of P100.00 (selling price of P900.000. b) 6% capital gains tax on the gross selling price of fair market value. A dealer in securities sold unlisted shares of stocks of a domestic corporation in 2010 and derived a gain of P1 Million therefrom. b) Taxable at 5%/10% capital gains tax based on net capital gain. An individual. Taguig City. d) Subject to 10% final withholding tax. c) Taxable at ½ of 1% stock transaction tax based on the gross selling price or fair market value. d) Domestic corporation. Interest income of a domestic commercial bank derived from a peso loan to a domestic corporation in 2010 is : a) Subject to the 30% income tax based on its net taxable income. d) Is deductible. During the audit conducted by the BIR official.. it takes more than a year to finish) is: a) Cash method. 12. 14. if it can be shown that the lessor has correctly reported the rental income in his tax return. b) That is composed of individuals who exercise a common profession. 13. The appropriate method of accounting for a contractor on his long-term construction contract (i. a) The sale is exempt from income tax but subject to the ½ of 1% stock transaction tax. 15. c) Installment sale method. Accordingly.e. d) The sale is both exempt from the stock transaction tax and income tax. despite non-withholding of income tax by the corporation. d) Percentage of completion method. b) Accrual method. the claimed rental expense: a) Is deductible from the gross income of the corporation. . c) Is not deductible from gross income of the corporation due to non-withholding of tax. c) The sale is subject to the stock transaction tax and income tax.c) Ordinary income tax at the graduated rates of 5% to 32% of net taxable income. b) Is deductible from the gross income of the corporation. 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. d) 30% income tax on net taxable income. it was found that the rental income claimed by the corporation was not subjected to expanded withholding tax. provided that the 5% expanded withholding tax is paid by the corporation during the audit. b) The sale is subject to income tax computed at the graduated income tax rates of 5% to 32% on net taxable income. A resident Filipino citizen (not a dealer in securities) sold shares of stocks of a domestic corporation that are listed and traded in the Philippine Stock Exchange. 19. d) That derives professional income and rental income from property owned by it. The "all events test" refers to: a) A person who uses the cash method where all sales have been fully paid by the buyers thereof. d) Is deductible only if the taxpayer uses the cash method of accounting. or accredited retirement plan.c) That exclusively derives income from the practice of the common profession. debentures and indebtedness. c) Retirement benefits received from the GSIS. except: a) Gain from sale of long-term bonds. whereby the construction project has been completed during the year the contract was signed. provided the sales proceeds are invested in another real estate during the year. b) A person who uses the installment sales method. b) Value of property received by a person as donation or inheritance. c) A person who uses the accrual method. non-profit charitable association that sells its idle agricultural property is: a) Not required to file an income tax return nor pay income tax on the transaction to the BIR. d) Separation pay received by a retiring employee under a voluntary retirement program of the corporate employer. d) A person who uses the completed method. SSS. c) Is deductible only for a period of five years from date of purchase. where the full amount of consideration is paid in full by the buyer thereof within the year of sale. Which statement is correct? A non-stock. All the items below are excluded from gross income. 16. . b) Is deductible from the gross income of the borrower-corporation during the year or it may be capitalized as part of cost of the equipment. whereby an expense is deductible for the taxable year in which all the events had occurred which determined the fact of the liability and the amount thereof could be determined with reasonable accuracy. 17. The interest expense of a domestic corporation on a bank loan in connection with the purchase of a production equipment: a) Is not deductible from gross income of the borrower-corporation. 18. b) The four (4) donations are made by the Spouses Antonio to members of the family. and two (2) donations are made by Mrs. d) Required to withhold the applicable expanded withholding tax rate on the transaction and remit the same to the BIR. died on January 20. Car in Quezon City – P1 Million.b) Required to pay the 6% capital gains tax on the gross selling price of fair market value. 22.00. 21. c) Mandated to pay the 30% regular corporate income tax on the gain from sale. Roberto. And Mrs. in lieu of all national and local taxes.000. ABS Corporation is a PEZA-registered export enterprise which manufactures cameras and sells all its finished products abroad. d) ABS Corporation is exempt from all national and local taxes. provided it pays value added tax. 20. Cash in BPI Makati – P4 Million. b) ABS Corporation is exempt from the 30% corporate income tax on net income. except real property tax. While he was traveling with friends. .000. Shares of stocks of Apple Corporation. c) ABS Corporation is subject to the 30% corporate income tax on net income. resident Filipino citizen. 2011 in a California Hospital. who is to be married during the same year to Josefina Angeles. US corporation listed in NY Stock Exchange – US$1 = Php50. Jose Francisco. Mr. Mr. d) Two (2) donations made by the spouses to Roberto are entitled to deduction from the gross gift as donation proper nuptias. c) P15 Million. In May 2010. leaving personal and real properties with market values as follows: House and Lot in Quezon City – P10 Million. hence. USA. while two (2) other donations are made to strangers. subject to the graduated donor’s tax rates (2%-15%). Antonio. Melencio Antonio donated a house and lot with a fair market value of P10 Million to their sob. Which statement below is INCORRECT? a) There are four (4) donations made – two (2) donations are made by Mr. c) Two (2) donations are made by the spouses to members of the family. His gross estate for the Philippine estate tax purposes shall be: a) P13 Million. Melencio Antonio to Roberto and Josefina. Which statement is NOT correct? a) ABS Corporation is subject to the 5% final tax on gross income earned. Citibank in New York – US$5.00. b) P14 Million. Cash in bank in California – US$10. whichever is higher. 000 CDA shares that are unlisted in the local stock exchange for P10 per share. single.00.000. 2011. d) Maria Reyes is exempt from donor’s tax in 2011 because the donee is minor.000. she donated another P50. Mr.700. donated cash in the amount of P50. Which statement is correct? a) Maria Reyes is subject to donor’s tax in 2011 because gross gift is P100. Maria Reyes. In 2006. In view of a car accident in 2010.000. .5 Million.00.00 to her daughter Cristina. single-mother.00 to Cristina.00. Mr.000. Jose Ramos. Funeral expenses paid amounted to P250.00. bought 10.00.00. 26. 2011.000.000.000. leaving a residential house and lot with a market value of P1. b) 5%/10% capital gains tax on the capital gain of P50 per share. Vicente Tagle. and on December 20. c) Maria Reyes is exempt from donor’s tax in 2011 only to the extent of P50.d) P16 Million. 2011. b) His estate will be subject to estate tax because net estate is P1.00 a) His estate will be exempt from estate tax because the net estate is zero. d) Graduated income tax rates of 5% to 32% on the net taxable income from the sale of the shares. 24. d) His estate will be subject to estate tax because net estate is P800.8 Million and cash of P100. Vicente Tagle had to sell his CDA shares but he could sell the same only for P50 per share. 25.00. 23. b) Maria Reyes is exempt from donor’s tax in 2011 because gross gift is P100. 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.5 Million in 2011 is: a) Exempt from VAT because the gross sales do not exceed P2. died of a heart attack on October 10.650. On January 10. a retiree.000. In 2010.00.000. c) His estate will be subject to estate tax because net estate is P1. the said shares had a book value per share of P60 per share. Sale of residential house and lot by an official of a domestic corporation to another official in the same corporation for a consideration of P2. The sale is subject to tax as follos: a) 5%/10% capital gains tax on the capital gain from sale of P40 per share (P50 selling price less P10 cost). arrived at by deducting the cost (P10 per share) from the book value (P60 per share). b) MBM Corporation is both liable for the 12% VAT and 20% amusement tax on admissions. for VAT purposes? a) P10 Million.5 Million. c) Exempt from VAT because the seller is not a person engaged in real estate business. c) Is exempt from VAT. b) Is exempt from VAT.5 Million. it received a total gross receipts of P20 Million from the operation of movies.2 Million. plus P1. the total cost of services performed in 2010. A VAT-registered contractor performed services for his customer in 2010 and billed him P11. During the year 2010. c) MBM Corporation is both exempt from the 12% VAT and 20% amusement tax on admissions. Which statement below is correct? a) MBM Corporation is exempt from the 12% VAT. despite the fact that it did not register as a VAT person and its total annual sales of flowers do not exceed P1.2 Million. c) P8 Million plus VAT received from the customer in 2010. d) Is liable for VAT. MBM Corporation is the owner-operator of movie houses in Cavite. It did not register as a VAT person. broken down as follows: P10 Million – cost of services. 28. An importer of flowers from abroad in 2011: a) Is liable for VAT. d) MBM Corporation is liable for the 12% VAT. regardless of the gross selling price. d) P11. provided that his total importation of flowers does not exceed P1. the total cost of services performed plus 12% VAT. d) Taxable at 12% VAT output tax on the gross selling price of P2. but liable for the 20% amusement tax on admissions under the Local Government Code. Of the contract price of P10 Million.5 Million. . but exempt from the 20% amusement tax on admissions. 29. if it registers as a VAT person. and the balance of P4 Million plus VAT was received by the contractor in 2011. only P8 Million plus VAT thereon was received from the customer in 2010. 12% VAT. because the goods are treated as agricultural products. b) P8 Million. the amount received from the customer in 2010. 27.b) Exempt from VAT because the property sold is a capital asset.2 Million. How much is the taxable gross receipts of the contractor for 2010. his gross rental income during the year amounted to P2 Million. in determining the tax base on sale of taxable goods under the VAT system: a) The professional tax paid by the professional is included in gross receipts. .g.00 per month per unit. c) Gross receipts of CPA during the year amounted to P1 Million. for business tax purposes: a) As a lending investor liable to the 12% VAT on its gross receipts from interest income and from gross selling price from sale of unclaimed properties. d) The documentary stamp tax paid by the taxpayer is included in the gross selling price or gross receipts.30. Except for one transaction. 32. 31.000.2 Million. A pawnshop shall now be treated. Under the VAT system.. b) Lessor leases residential apartment units to individual tenants for P10. 33. However. lessor’s gross rental during the year amounted to P12 Million. Which one is VAT taxable? a) Sales of chicken by a restaurant owner who did not register as a VAT person and whose gross annual sales is P1. c) As exempt from 12% VAT and 5% gross receipts tax. it did not register as a VAT person with the BIR. the rest are exempt from value added tax. A lessor or real property is exempt from value added tax in one of the transactions below. d) Sales of a book store during the year amounted to P10 Million. there is no cascading because the tax itself is not again being taxed. b) The other percentage tax (e. c) The excise tax paid by the taxpayer before withdrawal of the goods from the place of production or from customs custody is included in the gross selling price. b) Not as a lending investor. before practicing his profession. gross receipts tax) paid by the taxpayer is included in gross selling price. the CPA registered as a VAT person in January 2011. d) As liable to the 12% VAT and 5% gross receipts tax. Which one is it? a) Lessor leases commercial stalls located in the Greenhills Commercial Center to VAT-registered sellers of cell phones. b) Sales of copra by a copra dealer to a coconut oil manufacturer who did not register as a VAT person and whose gross annual sales is P5 Million. but liable to the 5% gross receipts tax imposed on a non-bank financial intermediary under Title VI (Other Percentage Taxes). c) Importation of wines by a wine dealer with a fair market value of P2 million for sale to hotels in Makati City. The bank is subject to the tax as follows: a) 12% VAT on the rental income.000. but exempt from the 7% gross receipts tax. the bank foreclosed the same and entered into contracts of lease with tenants. c) Liable to both the 12% VAT and 7% gross receipts tax.000. b) Importation of raw. d) Lessor leases two (2) residential houses and lots at P50. 35. but exempt from VAT.000. d) Sale of vegetables by the restaurant operator to its customers. d) Exempt from both the 12% VAT and 7% gross receipts tax. 36. Which transaction below is subject to VAT? a) Sale of vegetables by a farmer in Baguio City to a vegetable dealer. b) Sale of vegetables by a vegetable dealer in Baguio City to another vegetable dealer in Quezon City. 34.c) Lessor leases commercial stalls at P10. c) Sale of vegetables by the QC vegetable dealer to a restaurant in Manila. b) 7% gross receipts tax on the rental income.00 per unit per month.2 million. unprocessed. but he registered as a VAT person. with real properties of the debtors being used as collateral to secure the loans.00 per stall per month and residential units at P15. . his gross rental income during the year amounted to P3 Million. 37. b) The seller issues a VAT invoice or official receipt. which separately indicates the VAT component.00 per month per unit. d) Importation of books worth P5 Million and school supplies worth P1. IBP Bank extended loans to debtors during the year. refrigerated Kobe beef from Japan by a beef dealer for sale to hotels in Makati City with a fair market value of P10 Million. Input tax is available to a VAT-registered buyer. provided that: a) The seller is a VAT-registered person. Which importation in 2011 is subject to VAT? a) Importation of fuels by a person engaged in international shipping worth P20 Million. When the debtors failed to pay the unpaid principal and interests after several demand letters. regardless of its gross receipts during the year because it is an educational center. d) A VAT-registered person whose sales are made to customers outside the Philippines and who issued VAT invoices or receipts with the words "ZERO RATED SALES" imprinted on the sales invoices or receipts. . c) Subject to the 12% VAT only. 39. regardless of its gross receipts during the year. Which statement is correct? A bar review center owned and operated by lawyers is: a) Exempt from VAT. input tax is not available as a credit against the output tax of the buyer of taxable goods or services during the quarter. c) Subject to VAT. d) Exempt from both the 3% common carriers tax and 12% VAT. For 2012. A hotel operator that is a VAT-registered person and who leases luxury vehicles to its hotel customers is: a) Subject to the 3% common carriers tax and 12% VAT. 40. if it is duly accredited by TESDA. b) Exempt from VAT. provided that its annual gross receipts do not exceed P1.5 Million in 2011. b) Subject to the 3% common carriers tax only. but the sale is covered by a VAT invoice or receipt issued by VAT-registered person. b) Any person who has excess input tax arising from local purchases of taxable goods and services.c) The goods or service is subject to or exempt from VAT. c) A VAT-registered person whose sales are made to clients in the Philippines. Claim for tax credit or refund of excess input tax is available only to: a) A VAT-registered person whose sales are made to embassies of foreign governments and United Nations agencies located in the Philippines without the BIR approval of the application for zero-rating. 41. d) Subject to VAT. if: a) The VAT invoice or receipt of the seller is registered with the BIR. d) The name and TIN of the buyer is not stated or shown in the VAT invoice or receipt Which statement shown above is NOT correct? 38. The public market vendor below. d) When the taxpayer did not file his income tax return for the year. who is not a VAT-registered person is liable to VAT in 2010. d) Once a doctor of medicine exercises his profession during the year. b) A person engaged in trade or business selling taxable goods or services must register as a VAT person. except: a) When the taxpayer files a fraudulent return. 44. processed coconut oils. c) She sells canned goods. 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) She sells live fish. he needs to register as a VAT person and to issue VAT receipts for professional fees received. b) She sells vegetables and fruits in her stall and her gross sales during the year is P1 Million. b) When the taxpayer offers to compromise the assessed tax based on erroneous assessment. and cut flowers in her stall and her gross sales during the year is P2. and crabs and her gross sales during the year is P5 Million. Which statement is FALSE under the VAT law? a) A VAT-registered person will be subject to VAT for his taxable transactions. when his gross sales or receipts for the year 2011 exceed P1. 43. 42. shrimps. d) The VAT invoice or receipt issued by the seller shows the Taxpayer Identification Number plus the word "VAT" or "VAT registered person".5 Million.5 Million. c) The VAT invoice or receipt is issued in the name of the VAT-registered buyer and his TIN is shown in said invoice or receipt. . regardless of his gross sales or receipts. c) A person who issued a VAT-registered invoice or receipt for a VAT-exempt transaction is liable to the 12% VAT as a penalty for the wrong issuance thereof. if: a) She sells raw chicken and meats and her gross sales during the year is P2 Million.b) The VAT invoice or receipt of the seller does not separately indicate the gross selling price or gross receipts and the VAT component therein. The Commissioner of Internal Revenue may NOT inquire into the bank deposits of a taxpayer. d) File an appeal to the Secretary of Justice within thirty (30) days from receipt thereof. 47. c) When a discrepancy has been determined between the value added tax paid and the amount due for the year. What is his proper remedy? a) File a petition for review with the Court of Tax Appeals within thirty (30) days from receipt thereof. a taxpayer does not agree thereto. 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.00 or more. 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. b) File a motion for reconsideration with the Commissioner of Internal Revenue. 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. A preliminary Assessment Notice (PAN) is NOT required to be issued by the BIR before issuing a Final Assessment Notice (FAN) on one of the following cases: a) When a taxpayer does not pay the 2010 deficiency income tax liability on or before July 15 of the year. 46.000. c) File an appeal to the Secretary of Finance within thirty (30) days from receipt thereof. When a protest against the deficiency income tax assessment was denied by the BIR Regional Director of Quezon City. On April 15. the appeal to the Court of Tax Appeals must be filed by a taxpayer: a) If the amount of basic tax assessed is P100. d) When the amount of discrepancy shown in the Letter Notice is not paid within thirty (30) days from date of receipt. 48. . Upon receipt of the ruling. 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. b) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return. The Commissioner of Internal Revenue issued a BIR ruling to the effect that the transaction is liable to income tax and value added tax. 2011.45. Which statement is correct? a) The assessment notice is void because it was mailed beyond the prescriptive period. b) December 30. If no denial of the protest was received by the taxpayer.00 or more. provided that prior leave of court is obtained. d) February 28. 2012. 49. when is the last day for filing of the appeal to the CTA? a) August 30. 51. c) Court of Tax Appeals. Which court has jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the waiver of the Statute of Limitations was validly effected? a) City Courts. 2011. c) January 30.000. b) Compromise of a tax liability is available only before trial at the CTA. d) January 30. d) If the amount of basic tax assessed is P1 Million or more. c) If the amount of basic tax assessed is P500. 2011 and filed its request for reinvestigation against the assessment on April 30. 2011. Additional documentary evidence in support of its protest was submitted by it on June 30. Using the same facts in the immediately preceding number. 2011.00 or more. 2011. 2012. The taxpayer received an assessment notice on April 15.000. Which statement below on compromise of tax liability is correct? a) Compromise of a tax liability is available only at the administrative level. c) December 30. b) September 30.b) If the amount of basic tax assessed is P300. 2011. d) Court of Appeals. 50. 2011. 52. 2012. b) Regional Trial Court. . 2011. when is the last day for the filing of its appeal to the CTA? a) November 30. but assuming that the final decision on the disputed assessment was received by the taxpayer on July 30. c) Compromise of a tax liability is available even during appeal. 2011. b) The taxpayer previously filed a request for reconsideration with the BIR official. including all expenses. 53. b) If the taxpayer files a request for reinvestigation that is approved by the Commissioner of Internal Revenue. b) Must be done successively. an appeal must be filed with the CTA: a) Within thirty (30) days after filing the administrative claim with the BIR. 56. In case of full or partial denial of the written claim for refund or excess input tax directly attributable to zero-rated sales. 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 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. c) If the taxpayer changes his address in the Philippines that is communicated to the BIR official. d) The taxpayer previously filed an extension to file a protest with the BIR official. if necessary. Commissioner. c) The taxpayer previously filed a request for reinvestigation with the BIR official. b) Within sixty (60) days after filing the administrative claim with the BIR. is collected. 55. d) Within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the 120-day period. 54. d) If a warrant of levy is served upon the taxpayer’s real property in Manila. until the full amount due. Which statement is correct? The collection of a deficiency tax assessment by distraint and levy: a) May be repeated. or the failure on the part of the Commissioner to act on the application within 120 days from the date of submission of complete documents.d) Compromise of a tax liability is still available even after the court decision has become final and executory. c) Automatically covers the bank deposits of a delinquent taxpayer. c) Within one hundred twenty (120) days after filing the administrative claim with the BIR. first by distraint and then by levy. . since preponderance of evidence is merely required for tax cases. provided that a computation of the tax liability is presented during the trial. 57. 59. d) Five (5) years from the commission of the violation of the law. d) Excusable negligence. X Corporation had excess income tax payment for the year 2008. from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. b) Gross negligence. 58. In filing its 2009 corporate income tax return. 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. d) The CTA will impose civil or tax liability. which was presented during the trial. b) The CTA will still hold the taxpayer liable for deficiency income tax liability in all cases. c) Willful blindness. and if disallowed. The accused’s mere reliance on the representations made by his accountant. 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: a) The CTA will automatically exempt the accused from any civil liability. b) Five (5) years from the date of issuance of the final assessment notice. and if the same be not known at the time. with deliberate refusal or avoidance to verify the contents of his tax return and to inquire on its authenticity constitutes: a) Simple negligence. 60. Can the refund be allowed or not. 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. and it may not change that decision in succeeding years.d) May be done only once during the taxable year. does X Corporation lose the claimed amount? a) X Corporation may not get the refund because the decision to carry over in 2008 was irrevocable for that year. 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 it chose to carry over in 2009. c) Three (3) years from the filing of the annual tax return. d) Both ordinances and resolutions are solemn and formal acts. provided that it will no longer carry over such amount or utilize the same against its income tax liability in the future. Which statement on prescriptive periods is true? a) The prescriptive periods to assess taxes in the National Internal Revenue Code and the Local Government Code are the same. Which of the following statements is NOT a test of a valid ordinance? a) It must not contravene the Constitution or any statute. .b) X Corporation may not get the refund in 2009. c) Taxes on agricultural and aquatic products when sold by the marginal farmers or fishermen. c) It must not be partial or discriminatory. d) Excise taxes on articles enumerated under the National Internal Revenue Code. and local government units. b) It must not be unfair or oppressive. c) X Corporation may get the refund. d) X Corporation may file instead a claim of tax credit. 62. c) Legislative acts passed by the municipal council in the exercise of its lawmaking authority are denominated as ordinances. except one: a) Income tax on banks and other financial institutions. d) It may prohibit or regulate trade. in lieu of refund. Taxing power of local government units shall NOT extend to the following taxes. Which statement is correct? a) Legislative acts passed by the municipal council in the exercise of its lawmaking authority are denominated as resolutions and ordinances. 64. b) Taxes of any kind on the national government. b) Legislative acts passed by the municipal council in the exercise of its lawmaking authority are denominated as resolutions. 61. its agencies and instrumentalities. 63. but the amount being claimed as refund may be utilized in succeeding years until fully exhausted because there is no prescriptive period for carry over of excess income tax payments. 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 property taxes. d) The appraisal and assessment of real property shall be based on audited financial statements of the owner. 66. Which statement below is NOT correct? a) MIAA is not a government-owned or controlled corporation because it is not organized as a stock or non-stock corporation. 68. The Manila International Airport Authority (MIAA) is exempt from real property tax. c) Assessed values. c) Action for the collection of local taxes may be instituted after the expiration of the period to assess and to collect the tax. b) Real property shall be classified for assessment purposes on the basis of its actual use. Which statement does NOT belong here? a) Real property shall be appraised at its current and fair market value. d) Local taxes may be assessed within ten (10) years from discovery of the underpayment of tax which does not constitute fraud. assessment. 67. b) Fair market value. b) MIAA is a government instrumentality vested with corporate powers and performing essential public services. d) Reproduction values. levy and collection of real property tax shall be guided by the following principles. the tax rates are applied on: a) Zonal values.b) Local taxes shall be assessed within five (5) years from the date they became due. One of the local government units below does NOT have the power to impose real property tax: . c) Real property shall be assessed on the basis of a uniform classification within each local political subdivision. The appraisal. 65. c) Tarlac Province. the remedy of the property owner is: a) To file a claim for refund in the Court of Tax Appeals if he has paid the tax. c) To file an appeal with the Provincial Board of Assessment Appeals within sixty (60) days from receipt of the assessment. within thirty (30) days from date of payment. 69. The City Government of Manila may NOT impose: a) Basic real property tax at 2% of the assessed value of real property. c) When the goods enter Philippines territory and remain within the customs house within thirty (30) days from date of entry. Importation of goods is deemed terminated: a) When the customs duties are paid. b) Additional levy on real property for the special education fund at 1% of the assessed value of real property. even if the goods remain within the customs premises. b) When the goods are released or withdrawn from the customs house upon payment of the customs duties or with legal permit to withdraw. d) When there is part payment of duties on the imported goods located in the customs area. d) Malabon. 70. Where the real property tax assessment is erroneous. d) Special levy on lands within its territory specially benefited by public works projects or improvements funded by it at 80% of the actual cost of the projects or improvements. b) Davao City. 71. b) To file an appeal with the Provincial Board of Assessment Appeals within thirty (30) days from receipt of the assessment. Metro Manila. c) Additional ad valorem tax on idle lands at a rate not exceeding 5% of the assessed value. d) To file an appeal with the Provincial Board of Assessment Appeals within sixty (60) days from receipt of the assessment and playing the assessed tax under protest. .a) Bacoor. Cavite. 73. b) The total value. 74. A protest against an assessment issued by the Collector of Customs for unpaid customs duties on imported goods shall be filed with: a) The Commissioner of Customs. weight and nature of packages indicated in the customs entry declaration and supporting documents differ from that in the manifest. c) The Court of Tax Appeals. b) The Regional Trial Court. The dutiable value of an imported article subject to an ad valorem rate of duty under existing law shall be: a) The home consumption value. d) The Collector of Customs. 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 report. c) The container is not leaking or damaged. b) The number. seizure. detention or release of property affected. c) Decisions of the Collector of Customs in cases involving liability for customs duties. Which cases are appealable to the CTA? a) Decisions of the Secretary of Finance in cases involving liability for customs duties. detention or release of property affected. seizure.NOTHING FOLLOWS - . detention or release of property affected. d) The transaction value. detention or release of property affected. . seizure. d) Decisions of the BIR Commissioner in cases involving liability for customs duties. d) The shipment is covered by alert/hold orders issued pursuant to an existing order.72. 75. b) Decisions of the Commissioner of Customs in cases involving liability for customs duties. seizure. c) The total landed cost. M. Write legibly. During the year. Do not repeat the question.HAND IN YOUR ANSWER SHEET. THERE IS NO NEED TO RETURN THIS QUESTIONNAIRE TO HEAD WATCHER. which showed a net taxable income of P30 Million . VILLARAMA. Set B ESSAY – TYPE QUESTIONS INSTRUCTIONS The following questionnaire consists of ten (10) questions (numbered I to X) contained in SIX (6) pages. to take advantage of the presence of many Filipino workers in that area and its booming economy. set up in 2010 a branch office in Shanghai City. Answer the question directly and concisely. Chairperson 2012 Bar Examinations Committee PLEASE CHECK THAT THIS SET CONTAINS SEVEN (7) PAGES (INCLUDING THIS PAGE). an answer to a sub-question/s under the same number maybe written continuously on the same page and succeeding pages until completed. which was organized in 2000 and existing under the laws of the Philippines and owned by the Sy Family of Makati City. GOODLUCK!!! _____________________________________ MARTIN S. the bank .M. because the Shanghai Branch is treated as a foreign corporation . China.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. HAND IN YOUR NOTEBOOK. WARNING: NOT FOR SALE OR UNAUTHORIZED USE TAXATION LAW I Anchor Banking Corporation.-5 P. 2012 BAR EXAMINATIONS TAXATION LAW 14 October 2012 3:30 P. JR. Begin your answer to each numbered question on a separate page. THERE IS NO NEED TO RETURN THIS QUESTIONNAIRE TO THE HEAD WATCHER. provided that the installation part of the project may be sub-contracted to a local construction company. had a fair market value of P20Million. is very much interested in the property and he offered to buy the same for P20 Million. a domestic corporation. a domestic corpoartion engaged in the refinery of petroleum products. Assume that the project was 40% complete in 2010 and 100% complete in 2011. which adopted the percentage of completion method of reporting income and expenses. In 2011. machinery and equipment – P50 Million. a) Is FC liable to Philippines income tax. GOC paid FC as follows: P60 Million in 2010 and P40 Million in 2011.and is taxed only on income from sources within the Philippines. based on the certificates issued by the certificates issued by the architects and engineers working on the project. Pursuant to the contract. (5%) b) Should the Shanghai Branch of Anchor Bank remit profit to its Head Office in the Philippines in 2011. Ayala? Explain your answer. (3%) c) Should Mr. and install an anti-pollution device for GOC’s refinery in the Philippines. 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%) II Foster Corporation (FC) is a Singapore-based foreign corporation engaged in construction and installation projects. another Filipino citizen. Mr. In 2010. and if so. liable to value added tax in 2010 and in 2011. the land . Antonio Ayala. The Assessor of Makati City re-assessed in 2011 the property at P10 Million. while the installation works were sub-contracted by the FC with the Philippine Construction Corporation (PCC). whereby FC shall design. Castillo liable for real property tax on the land beginning 2011 or beginning 2012? Explain your answer. and installation –P30 Million). (5%) b) Is PCC. these incomes are not taxable in the Philippines. Castillo liable for income tax in 2011 based on the offer to buy by Mr. He purchased a parcel of land in Makati City in 1970 at a consideration of P1 Million. (5%) III Mr. and FC paid PCC ion foreign currency through a Philippine bank as follows: P10 Million in 2010 and P20 Million in 2011. The project with a total cost of P100 Million was completed in 2011 at the following cost components: (design – P20Million. Ayala in 2012 for P20 Million. the design and supply contracts were done in Singapore by FC. Global Oil Corporation (GOC). how much revenue shall be reported by it in 2010 and in 2011? Explain your answer. and since the loan and other business transactions were done in Shanghai. a) When is Mr. which remained undeveloped and idle. Explain your answer. awarded an anti-pollution project to Foster Corporation. a) Is 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. Jose Castillo is a resident Filipino Citizen. subject to the condition as stated in The Deed of Sale that the buyer shall assume the capital gains tax thereon. how musch is the income tax due on the transaction . (2%) b) Is Mr. supply machinery and equipment. Castillo agree to sell the land to Mr. a resident citizen. how much income must she declare for the year? How much personal exemption is she entitled to? Explain your answer. Pedro Aguirre. X Corporation earlier requested the advice of a lawyer on whether or not it should file a request for reconsideration or a request for reinvestigation.000. Pablo Gonzales required to file income tax for 2010? If so. he was immediately brought to the hospital because of the heart attack and he was pronounced dead on June 30. (5%) c) Is the Estate of the late Pablo Gonzales required to file income tax return for 2010? If so. he was promoted to Vice-President of the company. The spouses have only one (1) minor child.000. (5%) IV Mr. a) Is Mr. how much income must it declare for the year? How much personal exemption is it entitled to? Explain your answer. Pablo Gonzales is the President of PG Corporation and he receives P50. (3%) c) Is Mr.and when must the tax return be filed and the tax be paid by the taxpayer? Explain your answer. the estate of the late Pablo Gonzales was settled extra-judicially in early 2011. With more responsibilities comes higher pay.2 Million to the car company.00 and paid the difference of P1. Aguirre? Explain your answer (2%) b) What is the nature of the old car – capital asset or ordinary asset? Explain your answer. Mr. (5%) VI 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.00 salary per month. In 2011. a) How much is the cost basis of the old car to Mr.000. which was bought three (3) years ago by the father of Mr. he decided to buy a new car worth P2 Million and he traded-in his old car with a market value of P800. which is being leased to a tenant for a monthly rental of P100.000. The lawyer said it does not matter wheteher the protest files against the assessment . 2010. The corresponding donor’s tax thereon was duly paid by the father. In late June 2010. Pedro Aguirre at price of P700. (5%) b) Is Mrs.00. (5%) V Spouses Pablo Gonzales and Teresita Gonzales.With no liabilities. Teresita Gonzales required to file income tax return fot 2010? If so. The old car. both resident citizens acquire during their marriage a residential house and lot located in Makati City. how much income must he declare for the year? How much personal and additional exemption is he entitled to? Explain your answer. is working for a large real estate development company in the country and in 2010. Aguirre liable to pay income tax on the gain from the sale of his old car? Explain your answer.00 was donated by him and registered in the name of his son. showing an overpayment of income tax of P1 Million. the corporation sought advice from you and said that it contemplates to file an amended return for 2011. 2012. If you disagree. Which is to be carried over to the succeeding year(s). inclusive of penalties incident to delinquency. a) What are the differences between a request for reconsideration and a request for reinvestigation? (5%) b) Do you agree with the advice of the lawyer? Explain your answer (5%) VII a) May the bank deposits – peso and foreign currency of the an individual taxpayer be disclosed by a commercial bank to the Commissioner of Internal Revenue. you may appeal this final decision within thirty (30) days from receipt hereof. in connection with a tax investigation being conducted by revenue officials. (5%) VIII In the examination conducted by the revenue officials against the corporate taxpayer in 2010." The assessment was immediately appealed by the taxpayer to the Court of Tax Appeals. otherwise said deficiency tax assessment shall become final. executory and demandable. (5%) b) In 2011. a) 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 . without filing its protest against the assessment and without a denial thereof by the BIR. Withi a year. requiring it not to allow any withdrawal from any existing bank deposit of he delinquent taxpayer mentioned in the Warrant and to freeze the same until the tax delinquency of said taxpayer is settled with the BIR? Explain your answer.S. pursuant to the US-Philippine Tax Treaty and othert existing laws.is a request for reconsideration or a request for reinvestigation. the corporation will file the formal request for refund for the excess payment. which shows that instead of carry over of the execss income tax payment. who is under examiniation by the officials of the US IRS. the BIR issued a final assessment notice and demand letter which states: "It is requested that the above deficiency tax be paid immediately upon receipt hereof. regarding the deposits of a U. On May 15. Should the BIR Commissioner agree to obtain such informarion from the bank and provide the same to the IRS? Explain your answer. the corporation filed its annual corporate income tax return for 2011. (5%) c) Is the bank secrecy lawq in the Philippines violated when the BIR issues a Warrant of Garnishment directed against a domestic bank. the Commissioner of the U. would your deny the petition for review filed by the taxpayer and consider the case as prematurely filed? Explain your answer (5%) IX On April 16. Citizen residing in the Philippines. This is our final decision based on investigation. Internal Revenue Service (IRS) requested in writing the Commissioner of Internal Reveneu to get the informatrion from a bank in the Philippines. without violating the relevant bank secrecy laws? Explain your answer. 2012. 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.S. If you were the judge. because it has same consequences or implications. (5%) X Explain the following statements: a) The acquittal of the taxpayer in a criminal action under the Tax Code does not necessarily result in a exeoneration of said taxpayer from his civil liability to pay taxes.M. 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. THERE IS NO NEED TO RETURN THIS QUESTIONNAIRE TO HEAD WATCHER.overpayment of tax or should you consider the option granted to taxpayers as irrevocable. page of . and TWENTY (20) Multiple Choice Questions (MCQs) numbered I to XX.NOTHING FOLLOWS HAND IN YOUR ANSWER SHEET.6:00P. not the back. 2. Check the number of pages and the page numbers at the upper right hand corner of each page of this Questionnaire and make sure it has the correct number of pages and their proper numbers. 2013 2:00P. Read each question very carefully and write your answers in your Bar Examination Notebook in the same order the questions are posed. while the MCQ portion contains questions worth 20%.M. BAR EXAMINATION 2013 TAXATION LAW October 13.. the imposition of the civil liability by the CTA should be automatic and no assessment notice from the BIR is necessary? (2%) . (3%) b) Should the accused be found guilty beyond reasonable doubt for violation of Section 255 of the Tax Code for failure to file tax return or to to spply correct information). to be answered within four (4) hours. The essay portion contains questions that are worth 80°/o of the whole examination. INSTRUCTIONS 1. This Questionnaire contains THIRTEEN (13) pages including these Instructions pages. Write your answers only at the front. once previously exercised by it? Explain your answer. There are TWELVE (12) Essay Questions numbered I to XII. could the corporationstill carry over such excess payment of income tax in the succeeding years. (5%) b) Should the petition for review filed with the CTA on the basisof the amended tax return be denied by the BIR and the CTA. The MCQ answers should begin in the page following the last page of your essay answers. You can use the questionnaire for notes you may wish/need to write during the examination. remember that a complete explanation does not require that you volunteer information or discuss legal doctrines that are not necessary or pertinent to the solution to the problem. In your answers. 5. A mere "Yes" or "No" answer without any corresponding explanation or discussion will not be given any credit. leaving or making any distinguishing or identifying mark in the exam Notebook is considered cheating and can disqualify you for the Bar examinations.some MCQs may need careful analysis both of the questions and the choices offered. starting at the back page of the first sheet and the back of the succeeding sheets thereafter. or E) corresponding to your chosen answer. always briefly but fully explain your answers although the question does not expressly ask for an explanation. prayers. use the numbering system in the questionnaire. B. BRION Chairman 2013 Bar Examinations ESSAY QUESTIONS . C. to select the material from the immaterial facts. At the same time. An answer to a sub-question under the same number may be written continuously on the same page and the immediately succeeding pages until completed. 4. clearly. or private notes to the Examiner). Start each number on a separate page. and concisely. Writing. or sub-question. and to discern the points upon which the question turns. Answer the Essay questions legibly. D. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE J. ARTURO D. MCQs are to be answered by writing in your Notebook the capital letter (A. question. Make sure you do not write your name or any extraneous note/s or distinctive marking/s on your Notebook that can serve as identifying mark/s (such as names that are not in the given questions. and to reason logically in a lawyer-like manner to a sound conclusion from the given premises. You do not need to re-write or repeat the question in your Notebook. 3. Note that . It should show your knowledge and understanding of the pertinent principles and theories of law involved and their qualifications and limitations. Thus.every sheet in your Notebook. Your answer should demonstrate your ability to analyze the facts presented by the question. There is only one correct answer to every MCQ. It should demonstrate your ability to apply the law to the given facts. Note well the allocated percentage points for each number. choose the BEST answer from amon2 the offered choices. use the back pages of every sheet of your Examination Notebook. If the sheets provided in your Examination Notebook are not sufficient for your answers. Agustin. The hospital also accepted paying patients although none of its income accrued to any private individual. such as purchase of law books. all income were plowed back for the hospital's use and not more than 30% of its funds were used for administrative purposes. decided to sell for valuable and sufficient consideration a house and lot to his son. Was the BIR correct? (6%) V. Is the BIR correct? (7%) . Will the claim for refund prosper? (6%) II. ABC Corp. He died one year later. ABC Corporation is registered as a holding company and has an office in the City of Makati. and foreign exchange gains from its foreign currency account. car insurance and car depreciation. interests on its bank deposits. The City of Makati assessed ABC Corporation as a contractor or one that sells services for a fee. and distributes the net income to the partners. Atty. In its final adjustment return for the 2010 taxable year. It has no actual business operations. It invested in another company and its earnings are limited to dividends from this investment. A group of philanthropists organized a non-stock. In filing his own income tax return. claims deductions allowed under the Tax Code. 75 years old and suffering from an incurable disease. Agustin's estate. Subsequently. Is the City of Makati correct? (6%) IV. non-profit hospital for charitable purposes to provide medical services to the poor. at what rate? (6%) III. had excess tax credits arising from its over-withholding of income payments. The partnership computes its gross revenues. ABC Corp. Atty. changed its mind and applied for a refund of the excess tax credits. the BIR argued that the house and lot were transferred in contemplation of death and should therefore form part of the gross estate for estate tax purposes. entertainment expenses. in accordance with its articles of partnership. In the settlement of Mr. It opted to carry over the excess tax credits to the following year. Gambino is a partner in a general professional partnership. Gambino. Is the hospital subject to tax on its income? If it is. Gambino claimed deductions that the partnership did not claim. The BIR disallowed the deductions. Mr. including Atty.I. Abcede received another LA for the same year 2009. Gainsburg has no office in the Philippines and does no business in the Philippines. on the ground that Mr. the Bureau of Customs. Barbera as a donor. Was the assessment proper? (5%) IX. Amado for real property taxes on the land and the warehouse. his wife renounced her inheritance and her share of the conjugal property in favor of their children. investigated and assessed ABC Corp. for deficiency customs duties and VAT.000 for the opinion. XYZ Law Offices. Was the BIR correct? (7%) X.000 to pesos and deposited the converted amount in the XYZ Law Offices account. On October 15. He paid the deficiency. Gainsburg remitted its payment through Citibank which converted the remitted US$1 .000 kilos of steel ingots and paid customs duties and VAT to the Bureau of Customs on the importation. pursuant to a Letter of Authority (LA) issued by the Regional Director. Is the Bureau of Customs correct? (7%) VII. What are the tax implications of the payment to XYZ Law Offices in terms of VAT and income taxes? (7%) VIII. Mr. 2009. Mr. Mr. Amado leased a piece of land owned by the Municipality of Pinagsabitan and built a warehouse on the property for his business operations. but the e-mail came from California where Gainsburg has an office. imported 1. this time from the National Investigation Division. Abcede contested the LA on the ground that he can only be investigated once in a taxable year. Abcede was assessed deficiency income taxes by the BIR for the year 2009. In 2010. Abcede's 2009 return was fraudulent. Barbera who died intestate. The BIR determined that there was a taxable gift and thus assessed Mrs. citing provisions of the Tariff and Customs Code on post-audit. a law partnership in the Philippines and a VAT-registered taxpayer. Amado objected to the assessment. . received a query by e-mail from Gainsburg Corporation. 2005. contending that he should not be asked to pay realty taxes on the land since it is municipal property. In the settlement of the estate of Mr.VI. ABC Corp. The Municipal Assessor assessed Mr. On February 17. XYZ Law Offices rendered its opinion on the query and billed Gainsburg US$1. Mr. Mr. a corporation organized under the laws of Delaware. In 2011. (7%) XI. Mr. Your client informed you that they have been directly approached with a proposal by a BIR insider (i.500.000.Decide. The BIR insider's proposal is to settle the matter by significantly reducing the assessment. Are the dividends taxable? (1%) (A) The dividends are taxable. II.000 and the fair market value per the tax declaration is P2. all of whom are individuals. should withhold a 10% creditable tax. (9%) MULTIPLE CHOICE QUESTIONS I. The total zonal value of the property is P5. (B) The dividends are tax exempt because of MGC Corp.000. (D) ABC Corp. On the fourth year of the tax holiday. It is now year 2013 and he is thinking of selling the property to buy a new one. a middle rank BIR official) on the tax matter they have referred to you for handling. criminal and ethical considerations will you take into account in giving your advice? Explain the relevance of each of these considerations. .e. He seeks your advice on how much income tax he would pay if he sells the property. declared and paid cash dividends to its stockholders..000. What material considerations will you take into account in computing the income tax? Please explain the legal relevance of each of these considerations. does not extend to its stockholders. ABC Corp. What tax. MGC Corp. He intends to sell it for P6.000. should deduct a final tax of 10% from the dividends. (7%) XII. (C) The dividends are exempt from tax. He used the property as his and his family's principal residence.000. but he will get 50% of the savings arising from the reduced assessment.'s income tax holiday. In 2000. Belen bought a residential house and lot for P1. the tax exemption of MGC Corp. You are the retained tax counsel of ABC Corp. was dissolved and liquidating dividends were declared and paid to the stockholders. MGC Corp. (B) The stockholders should declare their gain from their investment and pay income tax at the ordinary rates. What tax consequence follows? (1%) (A) ABC Corp. secured an income tax holiday for 5 years as a pioneer industry.000. Alvarez can still contest it. III. without any explanation of the factual and legal bases for the assessment. all that Mr.'s retained earnings.'s fiscal year.(C) The dividends are taxable if they exceed 50% of MGC Corp. Is the assessment valid? (1%) (A) The assessment is valid. Alas sells shoes in Makati through a retail store. in this case. He comes to you for advice because he thinks he is being subjected to double taxation. Mr. (B) The City of Makati does not have this power. Mr.000%. (D) The dividends are exempt if paid before the end of MGC Corp. the law requires a statement of the facts and the law upon which the assessment is based. Alvarez is in the retail business. The law was thought to be sufficient to drive many cigarette companies out of business. 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. Congress passed a sin tax law that increased the tax rates on cigarettes by 1. What advice will you give him? (1%) (A) Yes. Alvarez has no way to determine if the . and was questioned in court by a cigarette company that would go out of business because it would not be able to pay the increased tax. (B) The assessment is invalid. 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. Alvarez has to know is the amount of the tax. there is double taxation and it is oppressive. exceeded its power to tax V. (D) The assessment is invalid because Mr. (D) Double taxation is allowed where one tax is imposed by the national government and the other by the local government. (C) The assessment is valid but Mr. (C) Yes. IV. He received a deficiency tax assessment from the BIR containing only the computation of the deficiency tax and the penalties. there is double taxation and this is illegal m the Philippines. she had no income because she had no right to the mistakenly credited funds. income is income regardless of the source. At that time.000 were in effect donated to her. (D) It should not grant permission because the government does not have the storage facilities for glass panels. IX. It received an assessment from the BIR for deficiency income taxes. It has no more cash and all it has are unsold glass panels. only he would be liable for the tax. there was only one installation manager in the municipality. VIII. it seeks permission to pay in kind with glass panels. thus. It wants to pay but due to lack of cash. The municipality of San Isidro passed an ordinance imposing a tax on installation managers. The BIR entered the picture and investigated Helen. (D) It is constitutional because the power to tax is the power to destroy.000 were credited to her.000 via a telegraphic transfer through the Bank of PI. Would the BIR be correct if it determines that Helen earned taxable income under these facts? (1%) (A) No. The bank demanded the return of the mistakenly credited excess. Mr. otherwise. In 2010. Should the BIR grant the requested permission? (1%) (A) It should grant permission to make payment convenient to taxpayers. VI. but Helen refused. sales of cars were subject to a sales tax but the tax applied only to the . The bank's remittance clerk made a mistake and credited Helen with $1. it was not her fault that the funds in excess of $1.computation is erroneous. (C) It is constitutional as it applies to all persons in that class. Is the law constitutional? (1%) (A) It is unconstitutional because it clearly discriminates against this person.000. Prior to the VAT law. (C) It should grant permission. XYZ Corporation manufactures glass panels and is almost at the point of insolvency. Platon sent his sister Helen $1 . XYZ Corporation would not be able to pay. VII. (C) No. the funds in excess of$1. (B) It is unconstitutional for lack of legal basis. (B) It should not grant permission because a tax is generally a pecuniary burden.000 which she promptly withdrew. (D) No. (B) Yes. original or the first sale; the second and subsequent sales were not subject to tax. Deltoid Motors, Inc. (Deltoid) hit on the idea of setting up a wholly-owned subsidiary, Gonmad Motors, Inc. (Gonmad), and of selling its assembled cars to Gonmad at a low price so it would pay a lower tax on the first sale. Gonmad would then sell the cars to the public at a higher price without paying any sales tax on this 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. X. 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 promote the company's business. The company president declared that because they are childless, he and his wife could very well live in a smaller house. Was there a taxable fringe benefit? (1%) (A) There was no taxable fringe benefit since it was for the 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. XI. 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%) (A) The waiver is valid because the date of acceptance is immaterial and unimportant. (B) The waiver is invalid; the 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. XII. 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). Decide on the validity of the FAN. (1%) (A) The FAN is invalid; Andy was not given the chance to respond to the PAN, in 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. XIII. 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 Commissioner of Customs appealed to the CTA en bane without filing a motion for reconsideration. 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. XIV. 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 on the CIR's action. (1%) (A) The CIR is wrong; a donation must be express. (B) The CIR is wrong; financial capacity is not a 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. XV. 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 to 1% of the annual rental for these poles. Pheleco questioned 'the legality of the ordinance on the ground that it imposes an income tax which local government units (LGUs) are prohibited from imposing. Rule on the validity of the ordinance. (1%) (A) The ordinance is void; the fee is based on rental 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. XVI. 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 Aleta earn a taxable income? (1%) (A) She had a taxable 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. XVII. 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 donated property from the taxation perspective. (1%) (A) The property will form part of Mr. Mayuga's gross estate when he dies. (B) The property will not fom1 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 Mr. Z made an importation which he declared at the Bureau of Customs (BOC) as "Used Truck Replacement Parts".000. A is guilty for failing to consult his accountant. The BIR. (B) Mr. (1%) (A) Mr. interpose in an assessment against it by the BIR? (1%) (A) The BIR has no authority to obtain third party information to assess taxpayers. Mayuga's gross estate because it is no longer his. indicating the name of the seller or the buyer and the amount.000.donation. the court ruled against Mr. Is Mr. XIX. (C) The system of requiring taxpayers to submit third party information is illegal for violating . Mr. but did not commit smuggling. Which of the following defenses may XYZ Corp. (D) Mr. A's lawyer should pay the tax for giving the wrong advice. through the Commissioner. purchased from XYZ Corp. (D) The property will not form part of Mr. (C) Mr. (B) The third party information is inadmissible as hearsay evidence. Z only made a misdeclaration. Upon investigation. XVIII. (C) Mr. instituted a system requiring taxpayers to submit to the BIR a summary list of their sales and purchases during the year. A guilty of fraud? (1%) (A) Mr. He sought the opinion of his lawyer who advised him to report the commission in the succeeding year. Z did not commit smuggling because he submitted his shipment to BOC examination. Z committed smuggling. XYZ Corp. Characterize Mr. Z's action. Based on these lists. in Mr. he deliberately did not report the commission in the current year when he should have done so.000. He heeded his lawyer's advice and reported the commission in the succeeding year. XX. (B) Mr. the BIR discovered that in 2004 ABC Corp. Z did not commit smuggling because the shipment has not left the customs area. (D) Mr. A. goods worth P5. the container vans contained 15 units of Porsche and Ferrari cars. A is guilty of fraud.000. 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. did not declare these for income tax purposes as its reported gross sales for 2004was only Pl. A's petition against the BIR assessment. A is not guilty of fraud as he simply followed the advice of his lawyer. The lawyer's advice turned out to be wrong. M. to select the material from the immaterial facts. Start each number on a separate page.6:00 P. 2. and to discern the points upon which the question turns. and concisely.. use the numbering system in the questionnaire. question. use the back page of every sheet of your Examination Notebook. This Questionnaire contains THIRTEEN (13) pages including these Instructions pages. In your answers. If the sheets provided in your Examination Notebook are not sufficient for your answers. while the MCQ portion contains questions equivalent to not more than 20%. Check the number of pages and the page numbers at the upper right hand corner of each page of this Questionnaire and make sure it has the correct number of pages and their proper numbers. starting at the back page of the first sheet and the back of the succeeding sheets thereafter.the right to privacy. INSTRUCTIONS 1. There are TWENTY-NINE (29) Essay and Multiple Choice Questions (MCQs) to be answered within four (4) hours. Answer the Essay questions legibly. Write your answers only on the front. NOTHING FOLLOWS 0-0-0- 2014 BAR EXAMINATIONS TAXATION LAW October 12. 3. or sub-question. A mere "Yes" or "No" answer without any corresponding explanation or discussion will not be given . It should show your knowledge and understanding of the pertinent principles and theories of law involved and their qualifications and limitations. clearly. page of every sheet in your Notebook. (D) None of the above. 2014 2:00 P. An answer to a sub-question under the same number may be written continuously on the same page and the immediately succeeding pages until completed. not the back. The essay portion contains questions that are equivalent to not less than 80% of the whole examination. Note well the allocated percentage points for each number. Your answer should demonstrate your ability to analyze the facts presented by the question. It should demonstrate your ability to apply the law to the given facts. and to reason logically in a lawyer-like manner to a sound conclusion from the given premises.M. Read each question very carefully and write your answers in your Bar Examination Notebook in the same order the questions are posed. (5%) II. In addition. executory and demandable. executory and demandable. Mr. that is. (BWI). leaving or making any distinguishing or identifying mark in the exam Notebook is considered cheating and can disqualify you for the Bar examinations. choose the BEST answer from among the offered choices. BWI filed a letter protest before the BIR contesting said assessment and demanding that the same be cancelled or set aside. always briefly but fully explain your answers although the question does not expressly ask for an explanation. BWI’s failure to file a petition for review before the CTA rendered the assessment final.00 in cash to the campaign chest of Mr. PERALTA Chairman 2014 Bar Examinations I. YOU CAN BRING HOME THIS QUESTIONNAIRE OR HAND IT TOGETHER WITH YOUR NOTEBOOK J. You do not need to re-write or repeat the question in your Notebook. The BIR reasoned that its failure to decide the case within 180 days from filing of the letter protest should have prompted BWI to seek recourse before the Court of Tax Appeals (CTA) by filing a petition for review within thirty (30) days after the expiration of the 180-day period as mandated by the provisions of the last paragraph of Section 228 of the National Internal Revenue Code (NIRC). De Sarapen is a candidate in the upcoming Senatorial elections. Accordingly. 4. informing the latter of its alleged deficiency corporate income tax for the year 2009. t-shirts. Is the contribution of cash and campaign . There is only one correct answer to every MCQ. De Sarapen for use in his campaign. Mr. De Almacen. caps and other campaign materials that he also donated to Mr. 2013. C. On April 20. the Bureau of Internal Revenue (BIR) issued a notice of assessment against Blue Water Industries Inc. Mr. You can use the questionnaire for notes you may wish/need to write during the examination.000. At the same time. umbrellas. remember that a complete explanation does not require that you volunteer information or discuss legal doctrines that are not necessary or pertinent to the solution to the problem. Make sure you do not write your name or any extraneous note/s or distinctive marking/s on your Notebook that can serve as an identifying mark/s (such as names that are not in the given questions. However. MCQs are to be answered by writing in your Notebook the capital letter A. B. On March 27. Note that some MCQs may need careful analysis both of the questions and the choices offered. or E corresponding to your chosen answer. De Almacen purchased tarpaulins. contributed P500. on May 19. 2012. De Sarapen to introduce much needed reforms in the country.any credit. 5. Writing. Thus. or private notes to the Examiner). after more than a year from the filing of the letter protest. a domestic corporation. De Sarapen. D. DIOSDADO M. believing in the sincerity and ability of Mr. prayers. the BIR informed BWI that the latter’s letter protest was denied on the ground that the assessment had already become final. Is the contention of the BIR correct? Explain. 2012. Wanting to give back to the chapel and help defray the costs of its maintenance. In his case. After several months of inaction by the BIR on its claim for refund. Taimtim is an alumnus of the College of Medicine of Universal University (UU). the CTA denied the tax refund relative to the input VAT of GC for the first quarter of 2012. The City of Liwliwa assessed local business taxes against Talin Company. 2013. In due time. Talin Company filed a Complaint for Refund or Recovery of Illegally and/or Erroneously-collected Local Business Tax. can Dr. 2014.July 23. 2012 Fourth quarter .materials subject to donor’s tax? (4%) III. 2014.00 to the caretakers of the chapel which was evidenced by an acknowledgment receipt.000.January 27.October 25. Claiming that there is double taxation. Taimtim did when he was still reviewing for the board examinations. Gangwam Corporation (GC) filed its quarterly tax returns for the calendar year 2012 as follows: First quarter . Dr. The RTC denied the . 2012 Third quarter . (A) Is the CTA correct? (3%) (B) Assuming that GC filed its claim before the CTA on February 22. 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 dozen roses on all the Sundays of October. GC filed with the Bureau of Internal Revenue (BIR) an administrative claim for refund of its unutilized input Value-Added Tax (VAT) for the calendar year 2012. 2012 Second quarter . This was what Dr. reasoning that the claim was filed beyond the two-year period prescribed under Section 112(A) of the National Internal Revenue Code (NIRC). Prohibition with Prayer to Issue Temporary Restraining Order and Writ of Preliminary Injunction with the Regional Trial Court (RTC).Taimtim use his donation to the chapel as an allowable deduction from his gross income under the National Internal Revenue Code (NIRC)? (4%) IV. Dr. 2013 On December 22. Taimtim donated P50.April 25. GC decided to elevate its claim directly to the Court of Tax Appeals (CTA) on April 22. would your answer be the same? (3%) V. a privately-owned center for learning which grants yearly dividends to its stockholders. In computing his net taxable income. the folk saying proved to be true because he is now a successful cardiologist. the SP reasoned that the tax collected will be used to maintain the cleanliness of Baguio City and for the beautification of its tourist attractions. (B) is limited to the import of contraband or highly dutiable cargo beyond the reach of customs authorities. Choose the correct answer. through its lawyer. Aggrieved. Frank. (5%) VI. plates. In imposing the local tax. Baguio Travellers Association (BTA).00 tax on all the tourists and travellers going to Baguio City. Smuggling . catering equipment. The government lawyer representing the City of Liwliwa prayed for the dismissal of the petition on the ground that the same should have been filed with the Court of Tax Appeals (CTA). concealment or sale of such article after importation. Since its motion for reconsideration was denied. or assist in so doing. chairs. statement or practices. the Sangguniang Panglungsod (SP) of Baguio City enacted Tax Ordinance No. Will the petition prosper? (5%) VIII. (MKI) is a Value-Added Tax (VAT)-registered company which has been engaged in the catering business for the past 10 years. The RTC issued a TRO enjoining Baguio City from imposing the local tax. table linens. Claiming the tax to be unjust. or the filing of any false or fraudulent entry for the payment of drawback or refund of duties. Atty. (MGSC). VII. (D) is punishable by administrative penalty only. knowing the same to have been imported contrary to law. 19. an association of travel agencies in Baguio City. MKI sold its first delivery van. a . Talin Company filed a special civil action for certiorari with the Court of Appeals (CA). Inc. or shall receive. already 10 years old and idle. In accordance with the Local Government Code (LGC). contrary to law. conceal. Masarap Kumain. sell or any manner facilitate the transportation. 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. filed a petition for declaratory relief before the Regional Trial Court (RTC) because BTA was apprehensive that tourists might cancel their bookings with BTA’s member agencies. and delivery vans. (C) is committed by any person who shall fraudulently import or bring into the Philippines. buy. It has invested a substantial portion of its capital on flat wares. 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. Decide.application for a Writ of Preliminary Injunction. Series of 2014. countered that the CTA cannot entertain a petition for certiorari since it is not one of its powers and authorities under existing laws and rules. Talin Company.(1%) (A) does not extend to the entry of imported or exported articles by means of any false or fraudulent invoice. the entry of goods at less than the true weight or measure. imposing a P50. any article. to Magpapala Gravel and Sand Corp. he did not actually receive payment from Mr. (D) interest payment on loans for the purchase of machinery and equipment used in . Under the contract. Gipit borrowed from Mr.corporation engaged in the business of buying and selling gravel and sand. Triple Star. Before the first installment became due. (B) advertising expense to maintain some form of goodwill for the taxpayer’s business. Maunawain for the general cleaning services. Maunawain. Which of the following should not be claimed as deductions from gross income? (1%) (A) discounts given to senior citizens on certain goods and services. (4%) XII. (C) salaries and bonuses paid to employees. Maunawain P100. Maunawain cancelled the indebtedness of Mr. Gipit correct? Explain. Gipit claims that the cancellation of his indebtedness cannot be considered as gain on his part which must be subject to income tax.000. Mr. Gipit rendered general cleaning services in the entire office building of Mr. entered into a Management Service Contract with Single Star. Mr. payable in five (5) equal monthly installments. because according to him. Gipit up to the amount of P75. a domestic corporation. The selling price of the delivery van was way below its acquisition cost. Single Star shall provide managerial services for Triple Star’s Hongkong branch. Is the sale of the delivery van by MKI to MGSC subject to VAT? (4%) IX. All said services shall be performed in Hongkong.00.00. Mr. and as compensation therefor.000. (4%) X. a non-resident foreign corporation with no property in the Philippines. Is Mr. Mr. Which of the following is an exclusion from gross income? (1%) (A) Salaries and wages (B) Cash dividends (C) Liquidating dividends after dissolution of a corporation (D) De minimis benefits (E) Embezzled money XI. Is the compensation for the services of Single Star taxable as income from sources within the Philippines? Explain. A. and (4) Land in Alabama. Generous Bank extrajudicially foreclosed the mortgage on the property and acquired the same as the highest bidder. When is a pre-assessment notice required under the following cases? (1%) (A) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return. 2013 after undergoing a major heart surgery.business.S. XIII. (2) Condominium unit in Las Piñas City. X? (B) What are the items that may be considered as deductions from the gross estate? XV. X.A. He left behind to his wife and two (2) kids several properties. died on January 2. Mr. to wit: (4%) (1) Family home in Makati City. U. When Hopeful Corporation failed to pay the loan. a health maintenance organization in the Philippines. (2) Medical expenses.S. (4%) XIV. . (A) What are the items that must be considered as part of the gross estate income of Mr. Is Generous Bank liable to pay capital gains tax as a result of the foreclosure sale? Explain. (C) When the excise tax due on excisable articles has been paid. Hopeful Corporation obtained a loan from Generous Bank and executed a mortgage on its real property to secure the loan. U. A month after the foreclosure. and (3) Judicial expenses in the testate proceedings.. Hopeful Corporation exercised its right of redemption and was able to redeem the property. (B) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent. a Filipino residing in Alabama. The following expenses were paid: (1) Funeral expenses. (3) Proceeds of health insurance from Take Care. plaintiff Ma. On July 1. Tiaga has been a law-abiding citizen diligently paying his income taxes. may he already file a protest thereon? (4%) XVII. The Solicitor General. such as. Mr. informing her of a deficiency tax on her property. Plaintiff Ma. . In a civil case for Annulment of Contract of Sale. Reklamo. there was no need to pay the same since the sale was not registered with the Register of Deeds. She wants to contest the assessment. Mr. machineries and spare parts. On the other hand. counsel for BIR. but not limited to vehicles.(D) When an article locally purchased or imported by an exempt person. Is the Contract of Sale admissible? (4%) XVIII. Reklamo is now offering the Contract of Sale as her evidence. 65-2012 imposing Value-Added Tax (VAT) on association dues and membership fees collected by condominium corporations from its member condominium-unit owners. he was surprised to receive an assessment notice from the Bureau of Internal Revenue (BIR) informing him of a deficiency tax assessment as a result of a mathematical error in the computation of his income tax. On May 5. No documentary stamp tax on the Contract of Sale was paid because according to plaintiff Ma. capital equipment. The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. claims that association dues. Based on the assessment received by Mr. Reklamo presented in evidence the Contract of Sale which she sought to be annulled. 2012. Tiaga believes that there was no such error in the computation of his income tax for the year 2011. has been sold. membership fees. 2014. traded or transferred to non-exempt persons. Madam X owns real property in Caloocan City. (4%) (A) What are the administrative remedies available to Madam X in order to contest the assessment and their respective prescriptive periods? (B) May Madam X refuse to pay the deficiency tax assessment during the pendency of her appeal? XIX. and other assessment/charges collected by a condominium corporation are subject to VAT since they constitute income payments or compensation for the beneficial services it provides to its members and tenants. the lawyer of the condominium corporations argues that such dues and fees are merely held in trust by the condominium corporations exclusively for their members and used solely for administrative expenses in implementing the condominium corporations’ purposes. Accordingly. Tiaga. The RMC’s validity is challenged before the Supreme Court (SC) by the condominium corporations. which he filed on April 15. XVI. as appearing on the face of his income tax return for the year 2011. 2014. she received a notice of assessment from the City Assessor. (BGI) for P200 million. Haelton Corporation (HC)." Such deduction was disallowed by the Bureau of Internal Revenue (BIR) Examiner. Do you agree with the BIR? Explain. The heirs of Mr. the unpaid balance of the loan amounted to P2 million. Belly. What is the liability of Haeltown Corporation. in turn. during the same period. Choose the correct answer. Sakitin died. On August 31. Mr. claiming that the mortgaged property was not included in the computation of the gross estate. and not from Mr. Whose argument is correct? Decide. During his lifetime. 2014. (5%) XX. (3) the said payment of P40 million was recorded by BGI in its books as of June 30. it is a valid defense against the validity of a tax measure. as part of the "Claims against the Estate.the condominium corporations do not actually render services for a fee subject to VAT. (C) means taxing the same property twice when it should be taxed only once. using such property as collateral for the loan. even if the purposes of imposing the same are different. Sakitin deducted the amount of P2 million from the gross estate. and therefore. Mr. Subsequently. 2014. Based on the foregoing. Belly for P100 million. within the same jurisdiction. Inc. by the same taxing authority. thru its authorized representative Ms. Belly. if any? (4%) XXII. At the time of his death. Pares through the declaration of cash dividends to all its stockholders. (2) as early as May 17. sold the same property on the same day to Bell Gates. sold a 16-storey commercial building known as Haeltown Building to Mr. Sakitin obtained a loan amounting to P10 million from Bangko Uno for the purchase of a parcel of land located in Makati City. (4%) XXI. and (4) the substantial portion of P40 million was withdrawn by Ms. Double Taxation . it is . Belly and BGI was notarized ahead of the sale between HC and Mr. Belly. with the same kind or character of tax. (B) is forbidden by law. 2014 as investment in Haeltown Building. 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%). These two (2) transactions were evidenced by two (2) separate Deeds of Absolute Sale notarized on the same day by the same notary public. Investigations by the Bureau of Internal Revenue (BIR) showed that: (1) the Deed of Absolute Sale between Mr. Pares. Mr. The loan was evidenced by a duly notarized promissory note. HC received P40 million from BGI.(1%) (A) is one of direct duplicate taxations wherein two (2) taxes must be imposed on the same subject matter. when availed of. if any. (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. and C. XXIII. (B) is a tax saving device within the means sanctioned by law. it usually subjects the taxpayer to further or additional civil or criminal liabilities. value-added tax as a person selling goods in the course of trade or business. Choose the correct answer. is the tax consequence on the .tantamount to taxing the same person twice by the same jurisdiction for the same thing. XXIV. what. among which are as follows: (6%) Earnings: (1) Professional/legal fees from various clients (2) Cash prize received from a religious society in recognition of the exemplary service of ABC Law Firm (3) Gains derived from sale of excess computers and laptops Payments: (1) Salaries of office staff (2) Rentals for office space (3) Representation expenses incurred in meetings with clients (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. the organization of which is prompted more on the mitigation of tax liabilities than for legitimate business purpose. all lawyers. (C) If ABC Law Firm earns net income in 2012. Tax Avoidance ‒ (1%) (A) is a scheme used outside of those lawful means and. ABC Law Firm received earnings and paid expenses. For the year 2012. A. regardless if the same is legal or not. B. (D) is any form of tax deduction scheme. (D) exists when a corporation is assessed with local business tax as a manufacturer. formed a partnership called ABC Law Firm so that they can practice their profession as lawyers. (C) is employed by a corporation. and at the same time. Choose the correct answer.part of ABC Law Firm insofar as the payment of income tax is concerned? What. in exchange for said officer’s revelation of Frosty Corporation’s trade secrets. how much? (1%) (B) Is he entitled to additional exemptions? If so.(1%) (A) may be enacted for the promotion of private enterprise or business for as long as it gives incidental advantage to the public or the State . is the tax consequence on the part of A. In January 2013. a competitor in the ice cream business. (4%) XXVII. In February 2014. how much? (1%) (C) What is the effect of the taxes withheld from his salaries on his taxable income? (2%) XXVIII. B. insofar as the payment of income tax is concerned? XXV. and his two (2) siblings are still minors and studying in grade school. if any. He now asks you the following: (A) Is he entitled to personal exemptions? If so. Tax laws . your friend got his first job as an o ffice clerk. he consulted you as he wanted to comply with all the rules pertaining to the preparation and filing of his income tax return. May Freezy Corporation claim the payment to the officer as deduction from its gross income? Explain. a domestic corporation engaged in the manufacture and sale of ice cream. Which of the following transactions is subject to Value-Added Tax (VAT)? (1%) (A) Sale of shares of stock-listed and traded through the local stock exchange (B) Importation of personal and household effects belonging to residents of the Philippines returning from abroad subject to custom duties under the Tariff and Customs Code (C) Services rendered by individuals pursuant to an employeremployee relationship (D) Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered with the Cooperative Development Authority XXVI. His parents have long retired from their work. and C as individual partners. made payments to an officer of Frosty Corporation. He is single and lives with his family who depends upon him for financial support. Freezy Corporation. and so Atty. 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 XXIX. Doña Evelina.M. Check the number of pages and the page numbers at the upper right hand corner of each page of this Questionnaire and make sure it has the correct number of pages and their proper numbers.M. hence. was assessed a considerable amount of local business taxes by the City Government of Bagnet by virtue of Tax Ordinance No. Nevertheless. the Court of Tax Appeals (CTA) affirmed the decision of the RTC. what advice will you give Doña Evelina so that she can recover the subject local business taxes? (B) If Doña Evelina eventually recovers the local business taxes. Despite her objections thereto. Read each question very carefully and write your answers in your Bar Examination Notebook in the same order the questions are posed. INSTRUCTIONS 1. No motion for reconsideration was filed and the decision became final and executory. ELP. 24. therefore. a rich widow engaged in the business of currency exchange. This Questionnaire contains eight (8) pages including these Instructions pages. Doña Evelina. page of . (4%) (A) If you are Atty. not the back. Her claim was denied. Write your answers only on the front. 2015 2:00 P. may not be delegated (C) are territorial in nature. There are 22 items (I to XXII) to be answered within four (4) hours. ELP. On appeal. ELP elevated her case to the Regional Trial Court (RTC). through her counsel Atty. The RTC declared Tax Ordinance No. must the same be considered as income taxable by the national government? ---ooo0ooo--- 2015 BAR EXAMINATIONS TAXATION LAW November 15. filed a written claim for recovery of said local business taxes and contested the assessment. Doña Evelina paid the taxes. unsatisfied with said Tax Ordinance. . 24 null and void and without legal effect for having been enacted in violation of the public ation requirement of tax ordinances and revenue measures under the Local Government Code (LGC) and on the ground of double taxation. 2.(B) are inherently legislative.6:00 P. or private notes to the Examiner). remember that a complete explanation does not require that you volunteer information or discuss legal doctrines that are not necessary or pertinent to the solution to the problem. always briefly but fully explain your answers although the question does not expressly ask for an explanation. is a professional boxer. Mr. You do not need to re-write or repeat the question in your Notebook. Writing. In a professional boxing match held in 2013. and to discern the points upon which the question turns. to select the material from the immaterial facts. Note well the allocated percentage points for each number. In your answers. (3%) II. Your answer should demonstrate your ability to analyze the facts presented by the question. use the back page of every sheet of your Examination Notebook. A's prize money qualify as an exclusion from his gross income? Why? . LEONARDO-DE CASTRO Chairperson 2015 Bar Examinations I. At the same time. A in the US taxable in the Philippines? Why? (2%) b) May Mr. to reason logically in a lawyer-like manner. question. a citizen and resident of the Philippines. Make sure you do not write your name or any extraneous note/s or distinctive marking/s on your Notebook that can serve as an identifying mark/s (such as names that are not in the given questions.every sheet in your Notebook. Thus. A mere "Yes" or "No" answer without any corresponding explanation or discussion will not be given any credit. An answer to a sub-question under the same number may be written continuously on the same page and the immediately succeeding pages until completed. and to form a sound conclusion from the given premises. 4. YOU CAN BRING HOME THIS QUESTIONNAIRE OR SUBMIT IT TOGETHER WITH YOUR NOTEBOOK JUSTICE TERESITA J. Explain the principles of a sound tax system. It should show your knowledge and understanding of the pertinent principles and theories of law involved and their qualifications and limitations. Answer the Essay questions legibly.000. and concisely. starting at the back page of the first sheet and the back of the succeeding sheets thereafter. 3.000. or sub-question. use the numbering system in the questionnaire. It should demonstrate your ability to apply the law to the given facts. prayers. he won prize money in United States (US) dollars equivalent to P300. leaving or making any distinguishing or identifying mark in the exam Notebook is considered cheating and can disqualify you for the Bar examinations. You can use the questionnaire for notes you may wish/need to write during the examination. If the sheets provided in your Examination Notebook are not sufficient for your answers. A. a) Is the prize money paid to and received by Mr. clearly. Start each number on a separate page. a domestic corporation. 2013. and affirming the assessment against said corporation. On July 31. CCC. a) If the goods were produced from Ms. Ms. bought ready-to-wear goods from Ms. 2013. What is the tax treatment of the cash dividends received from BBB. On June 25. filed a Petition for Review with the Court of Tax Appeals (CTA) in division. F could claim in the following taxable years: a) For2010 (2%) b) For 2011 (3%) c) For 2013 (2%) V. Inc. On December 29. the couple gave birth to triplets. C taxable in the Philippines? Explain. Inc. has individual and corporate stockholders. Inc. CCC. Inc. (4%) VII. they had twins. In June 2015. A use or apply the income taxes he paid on his prize money to the US when he computes his income tax liability in the Philippines for 2013? (4%) III. How may Mr. B. 2015. E and Ms. by the following stockholders: a) A resident citizen (1%) b) Non-resident alien engaged in trade or business (1%) c) Non-resident alien not engaged in trade or business (1% ) d) Domestic corporation (1%) e) Non-resident foreign corporation (1%) VI. C taxable in the Philippines? Explain. What were the personal exemptions/deductions which Mr. B's income from the sale to Ms. (2%) IV. 2011. F are both employees of AAA Corp. On May 15. received the Final Decision on Disputed Assessment issued by the Commissioner of Internal Revenue (CIR) dismissing the protest of CCC. 2011. E and Ms. (2%) b) If Ms. a resident citizen. On June 10. They got married on February 14. is Ms. B is an alien individual and the goods were produced in her factory in China. 2013. Inc. B's income from the sale of the goods to Ms.. Mr. B's factory in the Philippines. its Board of Directors approved the distribution of cash dividends to its stockholders. Inc. Inc. A's prize money. enjoyed a particularly profitable year in 2014. is Ms. 2015 of the CT A division dismissing its .(2%) c) The US already imposed and withheld income taxes from Mr. CCC. BBB. Differentiate between double taxation in the strict sense and in a broad sense and give an example of each. C. received a copy of the Decision dated July 22. a nonresident citizen. BBB. Mr. Inc. How will you respond? (4%) . Mr. What are de minim is benefits and how are these taxed? Give three (3) examples of de minimis benefits. Inc. (1%) XI.000.. filed with the Bureau of Internal Revenue (BIR) on January 31. a VAT-registered corporation. Is the immediate appeal by CCC. DDD Corp.00 unutilized excess input VAT of FFF. Inc. G.Petition. reported unutilized excess input VAT in the amount of Pl . (4%) XII. Inc. G filed a Petition for Review with the CTA on March 15. CCC. Inc. The residential house and lot will be used by officials of EEE. In June 2013. hoping to buy and move to a new house and lot closer to his children's school. Was DDD Corp. Indicate whether each of the following individuals is required or not required to file an income tax return: a) Filipino citizen residing outside the Philippines on his income from sources outside the Philippines.. H decided to sell the house and lot wherein he and his family have lived for the past 10 years. immediately filed a Petition for Review with the CT A en banc on August 6. Mr.000. entered into a lease agreement of a residential house and lot with EEE. H approaches you as a friend for advice if it is possible for the sale of their house to be exempted from capital gains tax and the conditions they must comply with to avail themselves of said exemption. in Singapore. 2013.? (2%) b) Discuss the proper procedure and applicable time periods for administrative and judicial claims for refund/credit of unutilized excess input VAT. a non-resident foreign corporation. IX. (1%) c) Resident citizen earning purely compensation income from two employers within the Philippines. (1%) b) Resident alien on income derived from sources within the Philippines. whose income taxes have been correctly withheld. Inc. did not subject the said lease to VAT believing that it was not a domestic service contract. Inc. for 2011. Hoping to impress his boss. the accountant of FFF. (1%) d) Resident citizen who falls under the classification of minimum wage earners. Not having received any communication from the BIR. Inc. 2015. (1%) e) An individual whose sole income has been subjected to final withholding tax. FFF.. Concerned about the capital gains tax that will be due on the sale of their house.00 unutilized excess input VAT of FFF. (4%) X. and EEE.000. Inc. Inc. a domestic corporation engaged in the business of leasing real properties in the Philippines.000.000. The lease agreement was signed by representatives from DDD Corp. (3%) For calendar year 2011. praying for the tax refund/credit of the Pl. DDD Corp. to the CTA en banc of the adverse Decision of the CTA division the proper remedy? (3%) VIII.00 attributable to its zero-rated sales.. a) Did the CTA acquire jurisdiction over the Petition of FFF. 2013 a claim for tax refund/credit of the Pl. Mr. during their visit to the Philippines. correct? Explain.000. for 2011. . what will be your advice? (2%) b) What are the distinctions between regular corporate income tax and minimum corporate income tax? (3%) XV. 2013. By virtue of its mandate. Before it could secure a certificate authorizing registration/tax clearance for the transfer of the shares of stock to JJJ.00. LLL reclaimed several portions of the foreshore and offshore areas of the Manila Bay. Inc. GGG. However. GGG.000. LLL is a government instrumentality created by Executive Order to be primarily responsible for integrating and directing all reclamation projects for the National Government. equivalent to 40% of the total outstanding capital stock of the latter. J. In BIR Ruling No. as the highest bidder. What are the options available for Dr. Inc. It commenced business operations on August 12. Are the reclaimed properties registered in the name of LLL subject to real property tax? (4 % ) b. K's dismay. 012-14. offered to sell through competitive bidding its shares in HHH Corp. Inc.00 constituting mostly of his office space rent. some of which were within the territorial jurisdiction of Q City. had to request a ruling from the BIR confirming that its sale of the said shares was at fair market value and was thus not subject to donor's tax.00 of his expenses were duly covered by receipts. In 2012.. K found that he earned gross professional income in the amount of P1. Inc. The Court of Appeals. but the Secretary affirmed said ruling.XIII. a) As Ms. while he incurred expenses amounting to P560. in charge of preparing the annual income tax return of the corporation for 2013. to Dr. K so he could maximize the deductions from his gross income? (3%) XVI. an employee of KKK Corp. In 2014. was lower than their book value. filed with the Court of Appeals a Petition for Review under Rule 43 of the Revised Rules of Court. LLL is leasing portions of the reclaimed properties for the establishment and use of popular . Dr. Ms. however. Dr. Before which Court should GGG. nor was it intended to operate commercially and compete in the private market. 2013. JJJ. K decided to return to his hometown to start his own practice. GGG. a. GGG. got confused on whether she should prepare payment for the regular corporate income tax or the minimum corporate income tax. only P320. Certificates of title to the reclaimed properties in Q City were issued in the name of LLL in 2008. 012-14. utilities.000. It was not organized as a stock or a non-stock corporation. Inc. 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. acquired the said shares in HHH Corp.000. seek recourse from the adverse ruling of the Secretary of Finance in the exercise of the latter's power of review? (3%) XIV. requested the Secretary of Finance to review BIR Ruling No. Inc. KKK Corp. so the difference between the selling price and the book value of said shares was a taxable donation. At the end of 2012. Will your answer be the same in (a) if from 2010 to the present time. the CIR held that the selling price for the shares of stock of HHH Corp. secured its Certificate of Incorporation from the Securities and Exchange Commission on June 3. J's supervisor.000. In April 2014. dismissed the Petition for lack of jurisdiction declaring that it is the CTA which has jurisdiction over the issues raised. and miscellaneous expenses related to his medical practice. Inc. L acquired both parcels of land in 1975 for ll200. The non-resident foreign corporations pay MMM. comment on the People's manifestation.321. the Public Prosecutor manifested that the People is reserving the right to file the corresponding civil action for the recovery of the civil liability for taxes.00. representing excess input VAT attributable to its effectively zero-rated sales in 2000. Inc. Inc. After filing an Information for violation of Section 254 of the National Internal Revenue Code (Attempt to Evade or Defeat Tax) with the CTA. MMM. Inc.fastfood restaurants J Burgers. At the time of donation. Said city ordinance was duly published on February 15. L owned several parcels of land and he donated a parcel each to his two children. Inc. Is there a ground for opposing said ordinance? (2%) b. Inc. MMM. entered into various interconnection agreements with local carriers. L's gifts to his children for purposes of computing donor's tax? (3%) XVIII.000. and K Chicken? (2%) XVII. while the fair market value of the same properties as shown in the schedule of values prepared by the City Assessors was 112. because the VAT official receipts submitted by MMM. MMM.00. the fair market value of the two parcels of land. a domestic telecommunications company.000. Under the Tariff and Customs Code. In what easels is the decision of the Collector automatically reviewed by the Commissioner of Customs? In what instance/s is the decision of the Commissioner automatically appealed to the Secretary of Finance? (4%) XIX.300. Mr. filed its Quarterly VAT Returns for 2000.. to substantiate said claim did not bear the words "zero-rated" as required under Section 4. On appeal. 2014. G Pizza. the CTA division and the CT A en bane affirmed the BIR ruling. The BIR ruled to deny the claim for refund of MMM. Subsequently.108-1 of Revenue Regulations (RR) No. What is the proper procedural remedy and applicable time periods for challenging the ordinance? (4%) XX. as amended: a. What is the proper valuation of Mr.500. in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. (3%) XXI.000. was 112. Inc. timely filed with the BIR an administrative claim for the refund of the amount of P6. MMM. As counsel for the accused. 7-95 should not prevail over a taxpayer's substantive right to . Inc. 2014 with effectivity date on March 1. handles incoming telecommunications services for non-resident foreign companies by relaying international calls within the Philippines. M City approved an ordinance levying customs duties and fees on goods coming into the territorial jurisdiction of the city.50. as determined by the CIR. in US dollars inwardly remitted through Philippine banks. RR No.486. appealed to the Supreme Court arguing that the NIRC itself did not provide for such a requirement. To broaden the coverage of its telecommunications services throughout the country. 7-95. MMM. When does importation begin and when is it deemed terminated? (2%) b. a. In 2014. Mr. Inc.00. Will your answer in (a) be any different if MMM. Medical expenses (2%) ---ooo0ooo--- . Claims against the estate (2%) b. Inc. Inc. was claiming refund of excess input VAT attributable to its effectively zero-rated sales in 2012? (2%) XXII. a. State the conditions for allowing the following as deductions from the gross estate of a citizen or resident alien for the purpose of imposing estate tax: a. Rule on the appeal of MMM. (3%) b.claim tax refund or credit.