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2006

2009

1. Enumerate the 3 stages or


aspects of taxation. Explain each.
5%

TRUE or FALSE. Answer TRUE if


the statement is true, or FALSE if
the statement is false. Explain
your answer in not more than
two (2) sentences. (5%)

Distinguish "direct taxes" from


"Indirect taxes". Give examples.
5%

A law that allows taxes to be paid


either in cash or in kind is valid.
When the financial position of
the taxpayer demonstrates a
clear inability to pay the tax, the
Commissioner
of
Internal
Revenue may validly compromise
the tax liability.
The doctrine of equitable
recoupment allows a taxpayer
whose claim for refund has
prescribed to offset tax liabilities
with his claim of overpayment.
A law imposing a tax on income
of religious institutions derived
from the sale of religious articles
is valid.
A false return and a fraudulent
return are one and the same.

2.
What is tax pyramiding? What is
its basis in law? 5%

Enumerate the four (4) inherent


limitations on taxation. Explain
each item briefly. (4%)

2005
Part I
a) Describe the power of
taxation. May a legislative body
enact laws to raise revenues in
the absence of a constitutional
provision granting said body the
power to tax? Explain.
b) May taxes be the subject of
set-off or compensation? Explain.
c) Can an assessment for a local
tax be the subject of set-off or
compensation against a final
judgment for a sum of money
obtained by the taxpayer against
the local government that made
the assessment? Explain.
d) Is a deficiency tax assessment
a bar to a claim for tax refund or
tax credit? Explain.
e) Is the approval of the court,
sitting as probate or estate
settlement court, required in the
enforcement and collection of
estate tax? Explain. (10%)
- II (1.) Explain briefly whether the
following items are taxable or
non-taxable:cralaw
a) Income from jueteng;
b) Gain arising from
expropriation of property;
c) Taxes paid and subsequently
refunded;
d) Recovery of bad debts
previously charged off;
e) Gain on the sale of a car used
for personal purposes. (5%)
(2.) State and discuss briefly

whether the following cases may


be compromised or may not be
compromised:cralaw
a) Delinquent accounts;
b) Cases under administrative
protest, after issuance of the
final assessment notice to the
taxpayer, which are still pending;
c) Criminal tax fraud cases;
d) Criminal violations already
filed in court;

3. What properties are exempt


from the real property tax? 5%

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%)

e) Cases where final reports of


reinvestigation or
reconsideration have been issued
resulting in the reduction of the
original assessment agreed to by
the taxpayer when he signed the
required agreement form. (5%)
- III (1.) A city outside of Metro
Manila plans to enact an
ordinance that will impose a
special levy on idle lands located
in residential subdivisions within
its territorial jurisdiction in
addition to the basic real
property tax. If the lot owners of
a subdivision located in the said
city seek your legal advice on the
matter, what would your advice
be? Discuss. (5%)
(2.) a) State and explain the basis
of dutiable value of an imported
article subject to an ad valorem
tax under the Tariff and Customs
Code.
b)
Distinguish
countervailing
duty
from
dumping duty. (5%)
(3.) Jacob, after serving a 5-year
tour of duty as military attach in
Jakarta,
returned
to
the
Philippines bringing with him his
personal effects including a
personal computer and a car.

4. 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
meritorious? Explain. 5%

claim

International Technologies, Inc.


(ITI) filed a claim for refund for
unutilized input VAT with the
Court of Tax Appeals (CTA). In the
course of the trial, ITI engaged
the services of an independent
Certified Public Accountant (CPA)
who examined the voluminous
invoices and receipts of ITI. ITI
offered in evidence only the
summary prepared by the CPA,
without the invoices and the
receipts, and then submitted the
case for decision.
Can the CTA grant ITI's claim for
refund based only on the CPA's
summary? Explain. (4%)

Would Jacob be liable for taxes


on these items? Discuss fully.
(5%)
- IV (1.) State with reasons the tax
treatment of the following in the
preparation of annual income tax
returns:cralaw
a) Proceeds of life insurance
received by a child as irrevocable
beneficiary;
b) 13th month pay and de
minimis benefits;
c) Dividends received by a
domestic corporation from
(i) another domestic corporation;
and
(ii) a foreign corporation;
d) Interest on deposits with
(i) BPI Family Bank; and
(ii) a local offshore banking unit
of a foreign bank;
e) Income realized from sale of
(i) capital assets; and
(ii) ordinary assets. (5%)
(2.) a) State the conditions
required by the Tax Code before
the Commissioner of Internal
Revenue could authorize the
refund or credit of taxes
erroneously or illegally received.

5. Vanishing deduction is availed


of by taxpayers to:
correct his accounting records to

Jessie
brought
into
the
Philippines a foreign-made luxury
car, and paid less than the actual
taxes and duties due. Due to the

b) Does a withholding agent have


the right to file an application for
tax refund? Explain. (5%)
-VA taxpayer received a tax
deficiency assessment of P1.2

reflect the actual deductions mad


reduce his gross income
reduce his output value-added
tax liability
reduce his gross estate
Choose the
Explain. 5%

correct

answer.

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%

discrepancy, the Bureau of


Customs
instituted
seizure
proceedings and issued a warrant
of seizure and detention. The car,
then parked inside a pay parking
garage, was seized and brought
by government agents to a
government impounding facility.
The Collector of Customs denied
Jessie's
request
for
the
withdrawal of the warrant.
Aggrieved, Jessie filed against the
Collector a criminal complaint for
usurpation of judicial functions
on the ground that only a judge
may issue a warrant of search
and seizure.

Million from the BIR demanding


payment within 10 days,
otherwise, it would collect
through summary remedies. The
taxpayer requested for a
reconsideration
stating
the
grounds therefor. Instead of
resolving the request for
reconsideration, the BIR sent a
Final Notice Before Seizure to the
taxpayer. May this action of the
Commissioner
of
Internal
Revenue be deemed a denial of
the request for reconsideration
of the taxpayer to entitle him to
appeal to the Court of Tax
Appeals?
Decide with reasons. (5%)

Resolve with reasons Jessie's


criminal complaint. (4%)
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%)

from all kinds of taxes, i.e.,


income, VAT, customs duties,
local taxes and real property tax
from income tax only
from value-added tax only
from real property tax only
from capital gains tax only

6. 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.
If in a taxable year a bookstore
has no tax due on which to apply

The Sangguniang Bayan of the


Municipality
of
Sampaloc,
Quezon, passed an ordinance
imposing a storage fee of ten
centavos (P0.10) for every 100
kilos of copra deposited in any
bodega within the Municipality's
jurisdiction. The Metropolitan
Manufacturing
Corporation
(MMC), with principal office in
Makati, is engaged in the

- VI Danilo, who is engaged in the


trading business, entrusted to his
accountant the preparation of his
income tax return and the
payment of the tax due. The
accountant filed a falsified tax
return by underdeclaring the
sales and overstating the
expense deductions by Danilo.

the tax credits, can the bookstore


claim from the BIR a tax refund in
lieu of tax credit? Explain. 2.5%
Can the BIR require the
bookstores to deduct the amount
of the discount from their gross
income? Explain. 2.5%
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%
7. 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 Manila- Baguio 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%

manufacture of soap, edible oil,


margarine, and other coconut oilbased products. It has a
warehouse in Sampaloc, Quezon,
used as storage space for the
copra purchased in Sampaloc and
nearby towns before the same is
shipped to Makati. MMC goes to
court to challenge the validity of
the ordinance, demanding the
refund of the storage fees it paid
under protest.

Is Danilo liable for the deficiency


tax and the penalties thereon?
What is the liability, if any, of the
accountant? Discuss. (5%)

Is the ordinance valid? Explain


your answer. (4%)

Kenya International Airlines (KIA)


is
a
foreign
corporation,
organized under the laws of
Kenya. It is not licensed to do
business in the Philippines. Its
commercial airplanes do not
operate
within
Philippine
territory, or service passengers
embarking
from
Philippine
airports. The firm is represented
in the Philippines by its general
agent, Philippine Airlines (PAL), a
Philippine corporation.
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 KIA's airline ticket sales
constituted income derived from
sources within the Philippines.
KIA filed a protest on the ground
that the P2,968,156.00 should be
considered as income derived
exclusively from sources outside

- VII An international airline with no


landing rights in the Philippines
sold tickets in the Philippines for
air transportation. Is income
derived from such sales of tickets
considered taxable income of the
said international air carrier from
Philippine sources under the Tax
Code? Explain. (5%)

the Philippines since KIA only


serviced passengers outside
Philippine territory.

8. 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%

9. 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%

Is the position of KIA tenable?


Reasons. (4%)
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%)

Republic Power Corporation


(RPC) is a government-owned
and
controlled
corporation
engaged
in
the
supply,
generation and transmission of
electric power. In 2005, in order
to provide electricity to Southern
Tagalog provinces, RPC entered
into an agreement with Jethro
Energy Corporation (JEC), for the
lease of JEC's power barges
which shall be berthed at the
port of Batangas City. The
contract provides that JEC shall
own the power barges and the
fixtures, fittings, machinery, and
equipment therein, all of which
JEC shall supply at its own cost,
and that JEC shall operate,

- VIII JR was a passenger of an airline


that crashed. He survived the
accident but sustained serious
physical injuries which required
hospitalization for 3 months.
Following negotiations with the
airline and its insurer, an
agreement was reached under
the terms of which JR was paid
the
following
amounts:
P500,000.00
for
his
hospitalization; P250,000.00 as
moral damages; and P300,000.00
for loss of income during the
period of his treatment and
recuperation. In addition, JR
received from his employer the
amount
of
P200,000.00
representing the cash equivalent
of his earned vacation and sick
leaves.
Which, if any, of the amounts he
received are subject to income
tax? Explain. (5%)
- IX Company A decides to close its
operations due to continuing
losses and to terminate the
services of its employees. Under
the Labor Code, employees who
are separated from service for
such cause are entitled to a
minimum of one-half month pay
for every year of service.
Company A paid the equivalent
of one month pay for every year
of service and the cash
equivalent of unused vacation
and sick leaves as separation
benefits.
Are such benefits taxable and

manage and maintain the power


barges for the purpose of
converting the fuel of RPC into
electricity. The contract also
stipulates that all real estate
taxes and assessments, rates and
other charges, in respect of the
power barges, shall be for the
account of RPC.

10. The Collector of Customs


issued an assessment for unpaid
customs duties and taxes on the
importation of your client in the
amount of P980,000.00. Where
will you file your case to protect
your client's right? Choose the
correct
courts/agencies,
observing their proper hierarchy.
5%
Court of Tax Appeals
Collector of Customs

In 2007, JEC received an


assessment of real property
taxes on the power barges from
the Assessor of Batangas City.
JEC sought reconsideration of the
assessment on the ground that
the power barges are exempt
from real estate taxes under
Section 234 [c] of R.A. 7160 as
they are actually, directly and
exclusively used by RPC, a
government-owned
and
controlled
corporation.
Furthermore, even assuming that
the power barges are subject to
real property tax, RPC should be
held
liable
therefor,
in
accordance with the terms of the
lease
agreement.
Is
the
contention of JEC correct?
Explain your answer. (4%)
ABCD Corporation (ABCD) is a
domestic
corporation
with
individual
and
corporate
shareholders who are residents
of the United States. For the 2nd
quarter of 1983, these U.S.-based
individual
and
corporate
stockholders
received
cash
dividends from the corporation.
The corresponding withholding
tax on dividend income --- 30%
for individual and 35% for
corporate
non-resident
stockholders --- was deducted at
source and remitted to the BIR.

Commissioner of Customs
Regional Trial Court
Metropolitan Trial Court

On May 15, 1984, ABCD filed


with the Commissioner of
Internal Revenue a formal claim
for refund, alleging that under
the RP-US Tax Treaty, the

subject to withholding tax under


the Tax Code?
Decide with reasons. (5%)

-XThe Roman Catholic Church owns


a 2-hectare lot in a town in Tarlac
province. The southern side and
middle part are occupied by the
Church and a convent, the
eastern side by a school run by
the
Church
itself,
the
southeastern side by some
commercial
establishments,
while the rest of the property, in
particular the northwestern side,
is idle or unoccupied.
May the Church claim tax
exemption on the entire land?
Decide with reasons. (5%)

Court of Appeals
Supreme Court

deduction withheld at source as


tax on dividends earned was
fixed at 25% of said income.
Thus, ABCD asserted that it
overpaid the withholding tax due
on the cash dividends given to its
non-resident stockholders in the
U.S. The Commissioner denied
the claim.
On January 17, 1985, ABCD filed
a petition with the Court of Tax
Appeals (CTA) reiterating its
demand for refund.
Does ABCD Corporation have the
legal personality to file the
refund on behalf of its nonresident stockholders? Why or
why not? (3%)

11. 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.
How much personal exemption
can Charlie claim? Explain. 2.5%
How much additional exemption
can Charlie claim? Explain. 2.5%

Is the contention of ABCD


Corporation correct? Why or why
not? (3%)
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.
Wena will declare the combined
compensation income of the
spouses, and Raffy 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.

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.

12. 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%

13. 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 5year reglementary period.

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.
YYY Corporation claimed this
expense as a deduction from
gross income in its 2008 return,
because the exact amount of the
expense was determined only in
2008. Is YYY's claim of deduction
proper? Reasons. (4%)
In 1999, Xavier purchased from
his friend, Yuri, a painting for
P500,000.00. The fair market
value (FMV) of the painting at
the time of the purchase was P1million. 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

- XI An alien employee of the Asian


Development Bank (ADB) who is
retiring soon has offered to sell
his car to you which he imported
tax-free for his personal use. The
privilege of exemption from tax is
granted to qualified personal use
under the ADB Charter which is
recognized by the tax authorities.
If you decide to purchase the car,
is the sale subject to tax? Explain.
(5%)

- XII Ralph Donald, an American


citizen, was a top executive of a
U.S. company in the Philippines
until he retired in 1999. He came
to like the Philippines so much
that following his retirement, he
decided to spend the rest of his
life in the country. He applied for
and was granted a permanent
resident status the following

If you were the judge, will you


dismiss the Information? Why?
5%

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%)

year. In the spring of 2004, while


vacationing in Orlando, Florida,
USA, he suffered a heart attack
and died. At the time of his
death, he left the following
properties:cralaw

Should the painting be included


in the gross estate of Zandro in
2007 and thus, be subject to
estate tax? Explain. (3%)

(b) a resthouse in Orlando,


Florida;

May a vanishing deduction be


allowed in either or both of the
estates? Explain. (3%)

(a) bank deposits with Citibank


Makati and Citibank Orlando,
Florida;

(c) a condominium
Makati;

unit

in

(d) shares of stock in the


Philippine subsidiary of the U.S.
Company where he worked;
(e) shares of stock in San Miguel
Corp. and PLDT;
(f) shares of stock in Disney
World in Florida;
(g) U.S. treasury bonds; and
(h) proceeds from a life insurance
policy issued by a U.S.
corporation.

14. 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

Emiliano Paupahan is engaged in


the business of leasing out
several residential apartment
units he owns. The monthly
rental for each unit ranges from
P8,000.00 to P10,000.00. His
gross rental income for one year
is P1,650,000.00. He consults you
on whether it is necessary for
him to register as a VAT taxpayer.
What legal advice will you give
him, and why? (4%)

Which of the foregoing assets


shall be included in the taxable
gross estate in the Philippines?
Explain. (5%)
- XIV (1.) Mr. Fermin, a resident of
Quezon City, is a Certified Public
Accountant-Lawyer engaged in
the practice of his two
professions. He has his main
office in Makati City and
maintains a branch office in Pasig
City. Mr. Fermin pays his
professional tax as a CPA in
Makati City and his professional
tax as a lawyer in Pasig City.
a) May Makati City, where he has

unreasonableness.
The
corporation claimed that the
bonus is an ordinary and
necessary expense that should
be allowed.

his main office, require him to


pay his professional tax as a
lawyer? Explain.
b) May Quezon City, where he
has his residence and where he
also
practices
his
two
professions, go after him for the
payment of his professional tax
as a CPA and a lawyer? Explain.
(5%)

If
you
were
the
BIR
Commissioner, how will you
resolve the issue? 5%

(2.) In 1995, the BIR filed before


the Department of Justice (DOJ)
a criminal complaint against a
corporation and its officers for
alleged evasion of taxes. The
complaint was supported by a
sworn statement of the BIR
examiners
showing
the
computation of the tax liabilities
of the erring taxpayer. The
corporation filed a motion to
dismiss the criminal complaint on
the ground that there has been,
as yet, no assessment of its tax
liability; hence, the criminal
complaint was premature. The
DOJ denied the motion on the
ground that an assessment of the
tax deficiency of the corporation
is not a precondition to the filing
of a criminal complaint and that
in any event, the joint affidavit of
the BIR examiners may be
considered as an assessment of
the tax liability of the
corporation.
Is the ruling of the DOJ correct?
Explain. (5%)
15. Lily's Fashion, Inc. is a
garment manufacturer located
and registered as a Subic Bay
Freeport
Enterprise
under
Republic Act No. 7227 and a nonVAT taxpayer. As such, it is
exempt from payment of all local
and national internal revenue
taxes. During its operations, it
purchased various supplies and

Miguel, a citizen and resident of


Mexico, donated US$1,000.00
worth of stocks in Barack Motors
Corporation,
a
Mexican
company, to his legitimate son,
Miguelito, who is residing in the
Philippines and about to be
married to a Filipino girlfriend.
Mexico does not impose any
transfer tax of whatever nature

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%
16. 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.

on all gratuitous transfers of


property.
Is Miguel entitled to claim a
dowry exclusion? Why or why
not? (3%)
Is Miguel entitled to the rule of
reciprocity in order to be exempt
from the Philippine donor's tax?
Why or why not? (3%)

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 professionconnected 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%)

If you were the judge, how will


you resolve this issue? 2.5%
Assuming Joachin is a registered
owner, will your answer be the
same? 2.5%
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%)
A
taxpayer
received
an
assessment notice from the BIR
on February 3, 2009. The
following day, he filed a protest,
in the form of a request for
reinvestigation,
against
the
assessment and submitted all
relevant documents in support of
the protest. On September 11,
2009, the taxpayer, apprehensive
because he had not yet received
notice of a decision by the
Commissioner on his protest,
sought your advice.
What remedy or remedies are
available to the taxpayer?
Explain. (4%)
Johnny transferred a valuable 10door commercial apartment to a
designated trustee, Miriam,
naming in the trust instrument
Santino, Johnny's 10-year old
son, as the sole beneficiary. The
trustee is instructed to distribute
the yearly rentals amounting to
P720,000.00.
The
trustee

consults you if she has to pay the


annual income tax on the rentals
received from the commercial
apartment.
What advice will you give the
trustee? Explain. (3%)
Will your advice be the same if
the trustee is directed to
accumulate the rental income
and distribute the same only
when the beneficiary reaches the
age of majority? Why or why
not? (3%)
Masarap Food Corporation (MFC)
incurred substantial advertising
expenses in order to protect its
brand franchise for one of its line
products. In its income tax
return, MFC included the
advertising expense as deduction
from gross income, claiming it as
an ordinary business expense. Is
MFC correct? Explain. (3%)