Tax Law Review JRU LAW

RTC JUDGE Mervin Jovito S. Samadan March 04, 2017

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I. ABC, a domestic corporation, entered into a software license agreement

with XYZ, a non-resident foreign corporation based in the U.S.. Under the
agreement which the parties forged in the US, XYZ granted ABC the right to use a
computer system program and to avail of technical know-how relative to such
program. In consideration for such rights, ABC agreed to pay 5% of the revenues
it receives from customers who will use and apply the program in the Philippines.

Discuss the tax implication of the transaction. (10%)

II. Mr. Jose Castillo is a resident Filipino citizen. He purchased a parcel of

land in Makati City in 1970 at a consideration of P1 million. In 2011, the land,
which remained undeveloped and idle, had a fair market value of P20 million. Mr.
Antonio Ayala, another Filipino citizen, is very much interested in the property and
he offered to buy the same for P20 million. The Assessor of Makati City re-
assessed in 2011 the property at P10 million.

Should Mr. Castillo agree to sell the land to Mr. Ayala in 2012 for P20
million, subject to the condition as stated in the Deed of Sale that the buyer shall
assume the capital gains tax thereon, how much is the income tax due on the
transaction and when must the tax return be filed and the tax be paid by the
taxpayer? Explain your answer. (10%)

III. 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) Claims against the estate;(5%)

b) Medical expenses (5%)

IV. Atty. Gambino is a partner in a general professional partnership. The

partnership computes its gross revenues, claims deductions allowed under the Tax
Code, and distributes the net income to the partners, including Atty. Gambino, in
accordance with its articles of partnership.

Was the BIR correct? (5%)

V. In 2009, Caruso, a resident Filipino citizen, received dividend income

from a US-based corporation which owns a chain of Filipino restaurants in the
West Coast, USA. The dividend remitted to Caruso is subject to US withholding
tax with respect to a non-resident alien like Caruso.

a) What will be your advice to Caruso in order to lessen the impact of

possible double taxation on the same income? (5%)

b) Would your answer in A be the same if Caruso became a US immigrant

in 2008 and had become a non-resident Filipino citizen? Explain the difference in
treatment for Philippine income tax purposes. (5%)
Taxation II JRU LAW
RTC JUDGE Mervin Jovito S. Samadan March 04, 2017
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VI. A group of philanthropists organized a non-stock, non-profit hospital

for charitable purposes to provide medical services to the poor. The hospital also
accepted paying patients although none of its income accrued to any private
individual; all income were plowed back for the hospital's use and not more than
30% of its funds were used for administrative purposes.

Is the hospital subject to tax on its income? If it is, at what rate? (10%)

VII. In the settlement of the estate of Mr. Barbera who died intestate, his
wife renounced her inheritance and her share of the conjugal property in favor of
their children. The BIR determined that there was a taxable gift and thus assessed
Mrs. Barbera as a donor.

Was the BIR correct? (5%)

VIII. 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. Will the house and
lot form part of Mr. Mayuga's estate? (5%)

IX. Mr. E and Ms. F are both employees of AAA Corp. They got married
on February 14, 2011. On December 29, 2011, the couple gave birth to triplets. On
June 25, 2013, they had twins. What were the personal exemptions/deductions
which Mr. E and Ms. F could claim in the following taxable years:

a) For 2010;(5%)

b) For 2011;(5%)

c) For 2013 (5%)

X. During his lifetime, Mr. Sakitin obtained a loan amounting to P10

million from Bangko Uno for the purchase of a parcel of land located in Makati
City, using such property as collateral for the loan. The loan was evidenced by a
duly notarized promissory note. Subsequently, Mr. Sakitin died. At the time of his
death, the unpaid balance of the loan amounted to P2 million. The heirs of Mr.
Sakitin deducted the amount of P2 million from the gross estate, as part of
the"Claims against the Estate." Such deduction was disallowed by the Bureau of
Internal Revenue (BIR) Examiner, claiming that the mortgaged property was not
included in the computation of the gross estate. Do you agree with the BIR?

Explain. (10%)

XI. Bonus: Jake's mom has four (4) children. Their names are May, June,
July and who is the 4th? (10%)