Professional Documents
Culture Documents
A false return and a fraudulent return are one and the same.
ANS:
a. FALSE. Generally, a characteristic of a valid tax is payable in
cash and not in kind.
d.FALSE. The profit was derived from religious related activity and
it is provided in the constitution that such transaction must be
exempted from taxes and duties.
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b. True. Sec. 204(A)(2) of the NIRC subject to minimum
compromise settlement of 10% of the basic tax assessed.
c.True. Take for example the corporate income tax the taxpayer
should select whether to claim for refund, apply for tax credit or
carry-over to next taxable period if there are overpayment of
taxes. Once a choice is made it is irrevocable. If no choice is made
it is presumed carry-over to be applied to future income tax
liabilities. Another example is the application of input tax to
output tax for VAT purposes.
ANS:
a. Taxation is for public purpose-the legislature is without any
power to appropriate public revenue for anything but for public
purpose
b. Taxation is inherently legislative
c. The government is exempt from tax
d. Territoriality
III Melissa inherited from her father a 300-square-meter lot. At the time
of her father's death on March 14, 1995, the property was valued at
P720,000.00. On February 28, 1996, to defray the cost of the medical
expenses of her sick son, she sold the lot for P600,000.00, on cash
basis. The prevailing market value of the property at the time of the
sale was P3,000.00 per square meter.
Is Melissa liable to pay capital gains tax on the transaction? If so, how
much and why? If not, why not? (4%)
Is Melissa liable to pay Value Added Tax (VAT) on the sale of the
property? If so, how much and why? If not, why not? (4%)
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ANS:
a.there is no income tax due. Income tax is only due if there is
capital gain or capital income. Here there is capital loss. The FMV
is 900,000. Melissa acquired it while its value is 720,000. She sold
is at the price of 600,000.
b. No. She is not liable to pay VAT since the sale of real property
was not made in the ordinary course of trade or business where
VAT is imposed.
Can the CTA grant ITI's claim for refund based only on the CPA's
summary? Explain. (4%)
ANS:
No, since a certification by the independent CPA is also required.
V Jessie brought into the Philippines a foreign-made luxury car, and paid
less than the actual taxes and duties due. Due to the discrepancy, the
Bureau of Customs instituted seizure proceedings and issued a warrant
of seizure and detention. The car, then parked inside a pay parking
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garage, was seized and brought by government agents to a
government impounding facility. The Collector of Customs denied
Jessie's request for the withdrawal of the warrant.
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%)
ANS:
a. the complaint may not prosper since the issuance of warrant of
search and seizures is the prerogative of the collector of customs
which the regular courts cannot interfere with pursuant to the
doctrine of primary jurisdiction. there is no usurpation of judicial
functions since the law categorically vests such authority upon
the collector of customs. although the facts are clear that the
seizure was illegal because it was seized outside the BOC'
custody, the luxury car not being a prohibited article, such
defense cannot also be maintained because the illegality of
seizures under the TCC is still within the BOC's domain and not
within the regular court's.
ANS:
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The ordinance is valid since the exercise by local governments of
the power to tax is ordained by the present Constitution. Each
local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees, and charges subject
to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy.
KIA sells airplane tickets through PAL, and these tickets are serviced by
KIA airplanes outside the Philippines. The total sales of airline tickets
transacted by PAL for KIA in 1997 amounted to P2,968,156.00. The
Commissioner of Internal Revenue assessed KIA deficiency income
taxes at the rate of 35% on its taxable income, finding that KIAs airline
ticket sales constituted income derived from sources within the
Philippines.
ANS
No. The position of KIA is not tenable. The Supreme Court has
held in one case that the absence of the flight operations within
the Philippine territory cannot alter the fact that revenues were
derived from ticket sales within the jurisdiction. As aptly stated in
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another actual case, the flow of wealth proceeded from and
occurred within the Philippine territory enjoying the protection
accorded by the Philippine government. In consideration of such
protection, the flow of wealth should share the burden of
supporting the government. Consequently, since the tickets
exchanged hands here and payments for fares were also made
here in the Philippine currency, such income is considered derived
from sources within the Philippines. Hence the position of KIA is
not tenable.
VIII The City of Manila enacted Ordinance No. 55-66 which imposes a
municipal occupation tax on persons practicing various professions in
the city. Among those subjected to the occupation tax were lawyers.
Atty. Mariano Batas, who has a law office in Manila, pays the ordinance-
imposed occupation tax under protest. He goes to court to assail the
validity of the ordinance for being discriminatory. Decide with reasons.
(3%)
ANS
- the case should be dismissed because regular courts have no
jurisdiction over questions raising the validity of tax ordinance; it
is with the sec of justice. however, the lawyer's contention is
tenable since a city under the LGC has no authority to impose
occupational taxes on persons practicing professions which
require government examinations; only a province can validly
enact such ordinance.
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imposed by the city (1 Cooley on Taxation, 4th ed., p. 492), it
being widely recognized that there is nothing inherently
obnoxious in the requirement that license fees or taxes be
exacted with respect to the same occupation, calling or activity
by both the state and the political subdivisions thereof. (51 Am.
Jur., 341.)
Also, under sec. 187 of the LGC: "That any question on the
constitutionality or legality of tax ordinances or revenue measures
may be raised on appeal within thirty (30) days from the
effectivity thereof to the Secretary of Justice who shall render a
decision within sixty (60) days from the date of receipt of the
appeal."
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ANS:
- No, JEC's contentions are wrong.
On January 17, 1985, ABCD filed a petition with the Court of Tax Appeals
(CTA) reiterating its demand for refund.
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Does ABCD Corporation have the legal personality to file the refund on
behalf of its non-resident stockholders? Why or why not? (3%)
ANS:
a. ABCD as a withholding agent has the legal personality to claim
for a refund or credit of excess withholding taxes erroneously
paid. A withholding agent is both the agent of the government
and the taxpayer. The withholding agent has such direct and
independent liability under the withholding tax system, that in the
event of non-payment of the tax, the tax shall be collected from
the withholding agent. With such burden to pay tax not withheld,
the withholding agent has the same personality to claim for
refund in the event of overpayment. (CIR vs. Procter and Gamble,
G.R. No. L-66838 December 2, 1991 / PNB vs. CIR, CTA Case No.
7355 July 12, 2010)
XI Raffy and Wena, husband and wife, are both employed by XXX
Corporation. After office hours, they jointly manage a coffee shop at the
ground floor of their house. The coffee shop is registered in the name of
both spouses. Which of the following is the correct way to prepare their
income tax return? Write the letter only. DO NOT EXPLAIN YOUR
ANSWER. (2%)
Raffy will declare as his income the salaries of both spouses, while
Wena will declare the income from the coffee shop.
All the income will be declared by Raffy alone, because only one
consolidated return is required to be filed by the spouses.
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Raffy will declare his own compensation income and Wena will declare
hers. The income from the coffee shop shall be equally divided between
them. Each spouse shall be taxed separately on their corresponding
taxable income to be covered by one consolidated return for the
spouses.
Raffy will declare his own compensation income and Wena will declare
hers. The income from the coffee shop shall be equally divided between
them. Raffy will file one income tax return to cover all the income of
both spouses, and the tax is computed on the aggregate taxable
income of the spouses.
ANS: D
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. For the legal services rendered in 2007, the law firm billed the
corporation only in 2008. The corporation duly paid.
ANS:
The income tax deduction for legal fees incurred for services
rendered in 2007 should have been accrued and claimed as an
allowable deduction from income tax in the Y2007 though it was
paid in the succeeding taxable year. Provided, withholding taxes
were remitted in the BIR in the Y2007.
XIII
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the purchase was P1-million. Yuri paid all the corresponding taxes on
the transaction. In 2001, Xavier died. In his last will and testament,
Xavier bequeathed the painting, already worth P1.5-million, to his only
son, Zandro. The will also granted Zandro the power to appoint his wife,
Wilma, as successor to the painting in the event of Zandro's death.
Zandro died in 2007, and Wilma succeeded to the property.
Should the painting be included in the gross estate of Xavier in 2001
and thus, be subject to estate tax? Explain. (3%)
ANS:
a. The painting should be included as part of Xaviers gross estate
since all property of the decedent at the time of his death, real or
personal tangible or intangible must be included. The painting is
owned by Xavier by way of donation, since it was transferred to
him for less than the adequate and full consideration of its fair
market value, with Yuri paying the corresponding donors tax.
Since the painting was acquired by donation within 2 years from
the death of Xavier, a vanishing deduction of 80% shall apply. As
such, only 20% of the paintings fair market value at the time of
death of the decedent shall form part of the gross estate and will
be subject to estate tax. (Sec. 100 - NIRC)
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No vanishing deduction may be allowed in Zandros estate since
the painting does not form part of his gross estate and it is
already beyond 5 years from the death his predecessor, Xavier.
ANS:
Yes. He should register as a VAT taxpayer since his annual gross
income exceeds the 1M threshold even though his gross monthly
income from residential lease per unit is within the 10K threshold.
ANS:
a. Miguel is not entitled to claim dowry exclusion. For the dowry to
be exempt from donors tax, the gift must have been made by a
resident of the Philippines. (Sec. 101 A NIRC)
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from Philippine donor's tax, the intangible personal property
donated must obtain business situs in the Philippines. Here, there
is no showing that the stocks in Barack Motors Corporation
donated to Miguelito have acquired business situs in the
Philippines. Such being the case, the rule of reciprocity cannot be
applicable.
XVI Ernesto, a Filipino citizen and a practicing lawyer, filed his income
tax return for 2007 claiming optional standard deductions. Realizing
that he has enough documents to substantiate his profession-connected
expenses, he now plans to file an amended income tax return for 2007,
in order to claim itemized deductions, since no audit has been
commenced by the BIR on the return he previously filed. Will Ernesto be
allowed to amend his return? Why or why not? (4%)
ANS:
No. Sec. 34(L) of the NIRC states that once a choice is made the
same is irrevocable for the taxable year. Further, he is not
required to submit his financial statements since he elected
optional standard deduction that is why no audit was made by the
BIR.
XVII A final assessment notice was issued by the BIR on June 13, 2000,
and received by the taxpayer on June 15, 2000. The taxpayer protested
the assessment on July 31, 2000. The protest was initially given due
course, but was eventually denied by the Commissioner of Internal
Revenue in a decision dated June 15, 2005. The taxpayer then filed a
petition for review with the Court of Tax Appeals (CTA), but the CTA
dismissed the same.
Is the CTA correct in dismissing the petition for review? Explain your
answer. (4%)
Assume that the CTA's decision dismissing the petition for review has
become final. May the Commissioner legally enforce collection of the
delinquent tax? Explain. (4%)
ANS:
a. The CTA is correct in dismissing the petition since it was filed
beyond the reglamentary period. If a protest is denied, in whole or
in part, or the 180 day period has already lapsed without the BIR
acting upon the protest, the taxpayer may appeal to the CTA
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within 30 days from the receipt of the denial or the lapse of the
period.
Here, the taxpayer did not appeal within 30 days after the 180
day period counted from July 31, 2000. As such, the right to
appeal to the CTA had already lapsed.
XVIII
ANS:
Since the problem was not clear on the date when all the relevant
documents were filed, I think there can be 2 ways to answer:
(1) The taxpayer has no more remedy since the assessment has
already become final, executory and demandable.
(2) The taxpayer may file an appeal to the Court of Tax Appeals
within 30 days from October 5, 2009 60 days from February 4,
2009 for filing all relevant documents + 180 days from April 5,
2009, or after receipt of the decision of the BIR denying the
protest, whichever comes first.
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If the protest is denied by the CTA Division he may file for a
motion for reconsideration within 15 days from receipt of the
decision. If the MR is denied he may appeal to the CTA en banc
within 15 days from receipt of the order denying the motion.
If the CTA en banc still denies the protest, a petition for certiorari
may be filed with the Supreme Court for final determination within
15 days of receipt of the en banc decision.
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%)
ANS:
a. The trustee must pay the annual income tax on the rental
income of the property held in trust. Income distributed currently
by the fiduciary to the beneficiary is taxable at the same rate
imposed upon individuals. (Sec. 60 A, 2 NIRC)
ANS:
- Yes. Since the expenses were incurred in protecting the brand
franchise of one of its products in the ordinary course or trade of
the business. Further, the advertising expense is not a capital
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expense since the brand franchise being protected is already in
the operational phase hence the outright deduction from gross
income in the year it was incurred.
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