2012 Bar, Q.

1: Bank A deposit money with Bank B which earns (d) A memorandum circular promulgated by the CIR that (b) All incomes subject to final withholding taxes liable to
interest that is subjected to the 20% final withholding tax. At the imposes penalty for violations of certain rules need not be income tax under the schedular tax system, while all
same time, Bank A is subjected to the 5% gross receipts tax on its published in a newspaper of general circulation or official ordinary income as well as income not subject to final
interest income on loan transactions to customers. Which gazette because it has the force and effect of law. withholding tax under the global tax system;
statement below INCORRECTLY describes the transaction? (c) All taxable incomes are subject to final withholding taxes
A: (d). A revenue memorandum circular shall not begin to be under the schedular tax system;
(a) There is double taxation because two taxes – income tax operative until after due notice thereof maybe fairly presumed (d) All taxable incomes from sources within and without the
and gross receipts tax are imposed on the interest incomes (CIR v. Philippine Airlines, G.R. No. 180066, July 8, 2009) Philippines are liable to income tax.
described above and double taxation is prohibited under
the 1987 Constitution 2012 Bar, Q. (3): Which statement below expresses the lifeblood A: (b). General Principles of Taxation.
(b) There is no double taxation because the first tax is income theory?
tax, while the second tax is business tax; 2012 Bar, Q. (6): Income from the performance of services is
(c) There is no double taxation because the income tax is on the (a) The assessed taxes must be enforced by the government. treated as income from within the Philippines, if:
interest income of Bank A on its deposits with Bank B (b) The underlying basis of taxation is government necessity,
(passive income), while the gross receipts tax is on the for without taxation, a government can neither exist nor (a) The payment of compensation for the service is made in the
interest income received by Bank A from loans to its debtor- endure; Philippines;
customers (active income); (c) Taxation is an arbitrary method of exaction by those who are (b) The contract calling for the performance of services is signed
(d) Income tax on interest income of deposits of Bank A is a in the seat of power; in the Philippines;
direct tax, while GRT on interest income on loan transaction (d) The power of taxation is an inherent power of the sovereign (c) The service is actually performed in the Philippines;
is an tax. to impose burdens upon subjects and objects within its (d) The recipient of service income is a resident of the
jurisdiction for the purpose of raising revenues. Philippines.
A: (a). There is no double taxation if the law imposes two different
taxes on the same income, business or property. A: (b). Taxes are the lifeblood of the government, for without A: (c). Sec. 42, NIRC
taxes, the government can neither exist nor endure. A principal
First, the taxes herein are imposed on two different subject attribute of sovereignty, the exercise of taxing power derives its 2012 Bar, Q. (7): For income tax purposes, the source of the
matters. The subject matter of the FWT (Final Withholding Tax) is source from the very existence of the state whose social contract service income is important for the taxpayer, who is a:
the passive income generated in the form of interest on deposits with its citizens obliges it to promote public interest and common
and yield on deposit substitutes, while the subject matter of the good. The theory behind the exercise of the power to tax (a) Filipino citizen residing in Makati City;
GRT (Gross Receipts Tax) is the privilege of engaging in the emanates from necessity; without taxes, government cannot fulfil (b) Non-resident Filipino citizen working residing in London,
business of banking. its mandate of promoting the general welfare and well-being of United Kingdom;
the people. (National Power Corporation vs. City of Cabanatuan, (c) Japanese citizen who is married to a Filipino citizen and
Second, although both taxes are national in scope because they G.R. No. 149110 April 9, 2003). residing in their family home located Fort Bonifacio, Taguig
are imposed by the same taxing authority - the national
City;
government under the Tax Code - and operate within the same
2012 Bar, Q. (4): Which statement is WRONG? (d) Domestic corporation.
Philippine jurisdiction for the same purpose of raising revenues,
the taxing periods they affect are different. The FWT is deducted
(a) The power of taxation may be exercised by the A: (b). Sec. 23 in relation to Sec. 42, NIRC
and withheld as soon as the income is earned, and is paid after
government, its political subdivisions, and public utilities;
every calendar quarter in which it is earned. On the other hand,
(b) Generally, there is no limit on the amount of tax that may be Note: (c) is also a correct answer considering that resident aliens
the GRT is neither deducted nor withheld, but is paid only after
imposed; are also taxable only on income derived from within the
every taxable quarter in which it is earned. (CIR v. BPI, G.R. No.
(c) The money contributed as tax becomes part of the public Philippines.
147375 dated June 26, 2006)
funds;
(d) The power of tax is subject to certain constitutional 2012 Bar, Q. (8): Interest income of a domestic commercial bank
2012 Bar, Q. (2): Which of the following statement is NOT limitations. derived from a peso loan to a domestic corporation in 2010 is:
correct?
A: (a). Inherent Powers of the State (a) Subject to the 30% income tax based on its net taxable
(a) In case of doubt, statutes levying taxes are constructed
income;
strictly the government;
2012 Bar, Q. (5): The Philippines adopted the semi-global tax (b) Subject to the 20% final withholding tax;
(b) The construction of a statute made by his predecessors is
system, which means that: (c) Subject to the 7.5% final withholding tax;
not binding upon the successor, if thereafter he becomes
(d) Subject to 10% final withholding tax.
satisfied that a different construction should be given;
(a) All taxable incomes, regardless of the nature of income, are
(c) The reversal of a ruling shall not generally be given
added together to arrive at gross income, and all allowable A: (a). Sec. 27(A), NIRC
retroactive application, if said reversal will be prejudicial to
deductions are deducted from the gross income to arrive at
the taxpayer;
the taxable income; 2012 Bar, Q. (9): A resident corporation is one that is:
(a) Organized under the laws of the Philippines that does (d) Is deductible only if the taxpayer uses the cash method of
business in another country; A: (c). Sec. 34(K), NIRC accounting.
(b) Organized under the laws of a foreign country that sets up a
regional headquarter in the Philippines doing product 2012 Bar, Q. (13): A resident Filipino citizen (not a dealer in A: (b). Sec. 34(B)(3), NIRC
promotion and information dissemination; securities) sold shares of stocks of a domestic corporation that
(c) Organized under the laws of the Philippines that engages are listed and traded in the Philippine Stock Exchange. 2012 Bar, Q. (17): The "all events test" refers to:
business in a special economic zone;
(d) Organized under the laws of a foreign country that engages (a) The sale is exempt from income tax but subject to the ½ of (a) A person who uses the cash method where all sales have
in business in Makati City, Philippines. 1% stock transaction tax; been fully paid by the buyers thereof;
(b) The sale is subject to income tax computed at the graduated (b) A person who uses the installment sales method, where the
A: (d). Sec. 22(H), NIRC income tax rates of 5% to 32% on net taxable income; full amount of consideration is paid in full by the buyer
(c) The sale is subject to the stock transaction tax and income thereof within the year of sale;
2012 Bar, Q. (10): A dealer in securities sold unlisted shares of tax; (c) A person who uses the accrual method, whereby an
stocks of a domestic corporation in 2010 and derived a gain of P1 (d) The sale is both exempt from the stock transaction tax and expense is deductible for the taxable year in which all the
Million therefrom. The gain is: income tax. events had occurred which determined the fact of the
liability and the amount thereof could be determined with
(a) Taxable at 30% regular corporate income tax based on net A: (a). Sec. 127, NIRC reasonable accuracy;
taxable income; (d) A person who uses the completed method, whereby the
(b) Taxable at 5%/10% capital gains tax based on net capital 2012 Bar, Q. (14): The appropriate method of accounting for a construction project has been completed during the year the
gain; contractor on his long-term construction contract (i.e., it takes contract was signed.
(c) Taxable at ½ of 1% stock transaction tax based on the gross more than a year to finish) is:
selling price or fair market value, whichever is higher A: (c). The accrual of income and expense is permitted when the
(d) Exempt from income tax (a) Cash method; all-events test has been met. This test requires:
(b) Accrual method;
A: (a). Sec. 22(U) in relation to Sec. 27, NIRC (c) Installment sale method; (1) Fixing of a right to income or liability to pay; and
(d) Percentage of completion method. (2) The availability of the reasonable accurate determination of
such income or liability.
2012 Bar, Q. (11): An individual, who is a real estate dealer, sold
a residential lot in Quezon City at a gain of P100,000.00 (selling A: (d). Sec. 127, NIRC
The all-events test requires the right to income or liability be
price of P900,000.00 and cost is P800,00.00). The sale is subject
fixed, and the amount of such income or liability be determined
to income tax as follows: 2012 Bar, Q. (15): A general professional partnership (GPP) is with reasonable accuracy. However, the test does not demand
one: that the amount of income or liability be known absolutely, only
(a) 6% capital gains tax on the gain;
that a taxpayer has at his disposal the information necessary to
(b) 6% capital gains tax on the gross selling price of fair market (a) That is registered as such with the Securities and Exchange compute the amount with reasonable accuracy. The all-events
value, whichever is higher; Commission and the Bureau of Internal Revenue; test is satisfied where computation remains uncertain, if its basis
(c) Ordinary income tax at the graduated rates of 5% to 32% of (b) That is composed of individuals who exercise a common is unchangeable; the test is satisfied where a computation may be
net taxable income; profession; unknown, but is not as much unknowable, within the taxable year.
(d) 30% income tax on net taxable income. (c) That exclusively derives income from the practice of the The amount of liability does not have to be determined exactly; it
common profession; must be determined with “reasonable accuracy.” (CIR v. Isabela
A: (c). Sec. 24, NIRC (d) That derives professional income and rental income from Cultural Corporation, G.R. No. 172231 February 12, 2007)
property owned by it.
2012 Bar, Q. (12): During the audit conducted by the BIR official,
A: (c). Sec. 26, NIRC. 2012 Bar, Q. (18): All the items below are excluded from gross
it was found that the rental income claimed by the corporation
income, except:
was not subjected to expanded withholding tax. Accordingly, the
claimed rental expense: 2012 Bar, Q. (16): The interest expense of a domestic (a) Gain from sale of long-term bonds, debentures and
corporation on a bank loan in connection with the purchase of a indebtedness;
(a) Is deductible from the gross income of the corporation, production equipment: (b) Value of property received by a person as donation or
despite non-withholding of income tax by the corporation;
inheritance;
(b) Is deductible from the gross income of the corporation, (a) Is not deductible from gross income of the borrower- (c) Retirement benefits received from the GSIS, SSS, or
provided that the 5% expanded withholding tax is paid by corporation; accredited retirement plan;
the corporation during the audit; (b) Is deductible from the gross income of the borrower- (d) Separation pay received by a retiring employee under a
(c) Is not deductible from gross income of the corporation due corporation during the year or it may be capitalized as part voluntary retirement program of the corporate employer.
to non-withholding of tax; of cost of the equipment;
(d) Is deductible, if it can be shown that the lessor has correctly (c) Is deductible only for a period of five years from date of A: (d). Sec. 32(B)(6), NIRC
reported the rental income in his tax return. purchase;
 California Hospital, USA, leaving personal and real properties 2012 Bar, Q. (25): Jose Ramos, single, died of a heart attack on
2012 Bar, Q. (19): Which statement is correct? A non-stock, non- with market values as follows: House and Lot in Quezon City – October 10, 2011, leaving a residential house and lot with a
profit charitable association that sells its idle agricultural P10 Million; Cash in bank in California – US$10,000.00; Citibank market value of P1.8 Million and cash of P100,000.00. Funeral
property is: in New York – US$5,000.00; Cash in BPI Makati – P4 Million; Car expenses paid amounted to P250,000.00
in Quezon City – P1 Million; Shares of stocks of Apple
(a) Not required to file an income tax return nor pay income tax Corporation, US corporation listed in NY Stock Exchange – US$1 (a) His estate will be exempt from estate tax because the net
on the transaction to the BIR, provided the sales proceeds = Php50. His gross estate for the Philippine estate tax purposes estate is zero;
are invested in another real estate during the year; shall be: (b) His estate will be subject to estate tax because net estate is
(b) Required to pay the 6% capital gains tax on the gross selling P1,650,000.00;
price of fair market value, whichever is higher; (a) P13 Million; (c) His estate will be subject to estate tax because net estate is
(c) Mandated to pay the 30% regular corporate income tax on (b) P14 Million; P1,700,00.00;
the gain from sale; (c) P15 Million; (d) His estate will be subject to estate tax because net estate is
(d) Required to withhold the applicable expanded withholding (d) P16 Million. P800,000.00.
tax rate on the transaction and remit the same to the BIR.
A: (b). Sec. 85, NIRC. A: (a). Sec. 85 and 86, NIRC
A: (b). Sec. 30, NIRC
2012 Bar, Q. (23): In 2006, Mr. Vicente Tagle, a retiree, bought 2012 Bar, Q. (26): Sale of residential house and lot by an official
2012 Bar, Q. (20): ABS Corporation is a PEZA-registered export 10,000 CDA shares that are unlisted in the local stock exchange of a domestic corporation to another official in the same
enterprise which manufactures cameras and sells all its finished for P10 per share. In 2010, the said shares had a book value per corporation for a consideration of P2.5 Million in 2011 is:
products abroad. Which statement is NOT correct? share of P60 per share. In view of a car accident in 2010, Mr.
Vicente Tagle had to sell his CDA shares but he could sell the (a) Exempt from VAT because the gross sales do not exceed
(a) ABS Corporation is subject to the 5% final tax on gross same only for P50 per share. The sale is subject to tax as follows: P2.5 Million;
income earned, in lieu of all national and local taxes; (b) Exempt from VAT because the property sold is a capital
(b) ABS Corporation is exempt from the 30% corporate income (a) 5%/10% capital gains tax on the capital gain from sale of P40 asset, regardless of the gross selling price;
tax on net income, provided it pays value added tax; per share (P50 selling price less P10 cost); (c) Exempt from VAT because the seller is not a person engaged
(c) ABS Corporation is subject to the 30% corporate income tax (b) 5%/10% capital gains tax on the capital gain of P50 per in real estate business;
on net income; share, arrived at by deducting the cost (P10 per share) from (d) Taxable at 12% VAT output tax on the gross selling price of
(d) ABS Corporation is exempt from all national and local taxes, the book value (P60 per share); P2.5 Million.
except real property tax. (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 A: (b). Sec. 106, NIRC
A: (a). Sec. 23 & 24, R.A. 7916 tax on the excess of the fair market value of the shares
over the consideration;
2012 Bar, Q. (27): An importer of flowers from abroad in 2011:
(d) Graduated income tax rates of 5% to 32% on the net taxable
2012 Bar, Q. (21): In May 2010, Mr. And Mrs. Melencio Antonio
income from the sale of the shares.
donated a house and lot with a fair market value of P10 Million (a) Is liable for VAT, if it registers as a VAT person;
to their sob, Roberto, who is to be married during the same year (b) Is exempt from VAT, because the goods are treated as
A: (c). Sec. 24(C) in relation to Sec. 100, NIRC; RR 6-2008
to Josefina Angeles. Which statement below is INCORRECT? agricultural products;
(c) Is exempt from VAT, provided that his total importation of
(a) There are four (4) donations made – two (2) donations are 2012 Bar, Q. (24): On January 10, 2011, Maria Reyes, single- flowers does not exceed P1.5 Million;
made by Mr. Melencio Antonio to Roberto and Josefina, and mother, donated cash in the amount of P50,000.00 to her (d) Is liable for VAT, despite the fact that it did not register as a
two (2) donations are made by Mrs. Antonio; daughter Cristina, and on December 20, 2011, she donated VAT person and its total annual sales of flowers do not
(b) The four (4) donations are made by the Spouses Antonio to another P50,000.00 to Cristina. Which statement is correct? exceed P1.5 Million.
members of the family, hence, subject to the graduated
donor’s tax rates (2%-15%); (a) Maria Reyes is subject to donor’s tax in 2011 because gross A: (d). Sec. 107, NIRC
(c) Two (2) donations are made by the spouses to members of gift is P100,000.00;
the family, while two (2) other donations are made to (b) Maria Reyes is exempt from donor’s tax in 2011 because
2012 Bar, Q. (28): A VAT-registered contractor performed
strangers; gross gift is P100,000.00;
services for his customer in 2010 and billed him P11.2 Million,
(d) Two (2) donations made by the spouses to Roberto are (c) Maria Reyes is exempt from donor’s tax in 2011 only to the
broken down as follows: P10 Million – cost of services, plus P1.2
entitled to deduction from the gross gift as donation extent of P50,000.00;
Million, 12% VAT. Of the contract price of P10 Million, only P8
proper nuptias. (d) Maria Reyes is exempt from donor’s tax in 2011 because the
Million plus VAT thereon was received from the customer in
donee is minor.
2010, and the balance of P4 Million plus VAT was received by the
A: (d). Sec. 101, NIRC; Tang Ho v. CA. contractor in 2011. How much is the taxable gross receipts of the
A: (b). Sec. 99(A), NIRC
contractor for 2010, for VAT purposes?
2012 Bar, Q. (22): While he was traveling with friends, Mr. Jose
Francisco, resident Filipino citizen, died on January 20, 2011 in a (a) P10 Million, the total cost of services performed in 2010;
(b) P8 Million, the amount received from the customer in (d) The documentary stamp tax paid by the taxpayer is included (d) Exempt from both the 12% VAT and 7% gross receipts tax.
2010; in the gross selling price or gross receipts.
(c) P8 Million plus VAT received from the customer in 2010; A: (b). Sec. 121, NIRC
(d) P11.2 Million, the total cost of services performed plus 12% A: (c). Sec. 106, NIRC; RR 16-2005
VAT. 2012 Bar, Q. (35): Which transaction below is subject to VAT?
2012 Bar, Q. (32): Except for one transaction, the rest are
A: (b). Sec. 108, NIRC exempt from value added tax. Which one is VAT taxable? (a) Sale of vegetables by a farmer in Baguio City to a vegetable
dealer;
2012 Bar, Q. (29): MBM Corporation is the owner-operator of (a) Sales of chicken by a restaurant owner who did not register (b) Sale of vegetables by a vegetable dealer in Baguio City to
movie houses in Cavite. During the year 2010, it received a total as a VAT person and whose gross annual sales is P1.2 another vegetable dealer in Quezon City;
gross receipts of P20 Million from the operation of movies. It did Million; (c) Sale of vegetables by the QC vegetable dealer to a
not register as a VAT person. Which statement below is correct? (b) Sales of copra by a copra dealer to a coconut oil restaurant in Manila;
manufacturer who did not register as a VAT person and (d) Sale of vegetables by the restaurant operator to its
(a) MBM Corporation is exempt from the 12% VAT, but liable whose gross annual sales is P5 Million; customers.
for the 20% amusement tax on admissions under the Local (c) Gross receipts of CPA during the year amounted to P1
Government Code; Million; the CPA registered as a VAT person in January A: (d). Sec. 109, NIRC
(b) MBM Corporation is both liable for the 12% VAT and 20% 2011, before practicing his profession;
amusement tax on admissions; (d) Sales of a book store during the year amounted to P10 Note: This is not absolutely true because a restaurant may sell the
(c) MBM Corporation is both exempt from the 12% VAT and Million; it did not register as a VAT person with the BIR. vegetables in their original state which will be exempt from VAT
20% amusement tax on admissions; under Sec. 109(A), irrespective of who is the seller.
(d) MBM Corporation is liable for the 12% VAT, but exempt A: (c). Sec. 108, NIRC
from the 20% amusement tax on admissions. 2012 Bar, Q. (36): Which importation in 2011 is subject to VAT?
2012 Bar, Q. (33): A lessor or real property is exempt from value
A: (a). CIR v. SM Prime Holdings, Inc., G.R. No. 183505, February added tax in one of the transactions below. Which one is it? (a) Importation of fuels by a person engaged in international
26, 2010 shipping worth P20 Million;
(a) Lessor leases commercial stalls located in the Greenhills (b) Importation of raw, unprocessed, refrigerated Kobe beef
2012 Bar, Q. (30): A pawnshop shall now be treated, for business Commercial Center to VAT-registered sellers of cell phones; from Japan by a beef dealer for sale to hotels in Makati City
tax purposes: lessor’s gross rental during the year amounted to P12 with a fair market value of P10 Million;
Million; (c) Importation of wines by a wine dealer with a fair market
(a) As a lending investor liable to the 12% VAT on its gross (b) Lessor leases residential apartment units to individual value of P2 million for sale to hotels in Makati City;
receipts from interest income and from gross selling price tenants for P10,000.00 per month per unit; his gross rental (d) Importation of books worth P5 Million and school supplies
from sale of unclaimed properties; income during the year amounted to P2 Million; worth P1.2 million.
(b) Not as a lending investor, but liable to the 5% gross (c) Lessor leases commercial stalls at P10,000.00 per stall per
receipts tax imposed on a non-bank financial intermediary month and residential units at P15,000.00 per unit per A: (c). Sec. 107 & 109, NIRC
under Title VI (Other Percentage Taxes); month; his gross rental income during the year amounted to
(c) As exempt from 12% VAT and 5% gross receipts tax; P3 Million; 2012 Bar, Q. (37): Input tax is available to a VAT-registered
(d) As liable to the 12% VAT and 5% gross receipts tax. (d) Lessor leases two (2) residential houses and lots at buyer, provided that:
P50,000.00 per month per unit, but he registered as a VAT
A: RR 10-2004; H. Tambunting, Inc. v.CIR, G.R. No. 172394, person. (a) The seller is a VAT-registered person;
October 13, 2010 (b) The seller issues a VAT invoice or official receipt, which
A: (b). Sec. 109(Q), NIRC separately indicates the VAT component;
2012 Bar, Q. (31): Under the VAT system, there is no cascading (c) The goods or service is subject to or exempt from VAT, but
because the tax itself is not again being taxed. However, in 2012 Bar, Q. (34): IBP Bank extended loans to debtors during the the sale is covered by a VAT invoice or receipt issued by VAT-
determining the tax base on sale of taxable goods under the VAT year, with real properties of the debtors being used as collateral registered person;
system: to secure the loans. When the debtors failed to pay the unpaid (d) The name and TIN of the buyer is not stated or shown in the
principal and interests after several demand letters, the bank VAT invoice or receipt
foreclosed the same and entered into contracts of lease with
(a) The professional tax paid by the professional is included in tenants. The bank is subject to the tax as follows: A: (b). Sec. 113(B), NIRC.
gross receipts;
(b) The other percentage tax (e.g., gross receipts tax) paid by (a) 12% VAT on the rental income, but exempt from the 7% 2012 Bar, Q. (38): Claim for tax credit or refund of excess input
the taxpayer is included in gross selling price; gross receipts tax; tax is available only to:
(c) The excise tax paid by the taxpayer before withdrawal of (b) 7% gross receipts tax on the rental income, but exempt
the goods from the place of production or from customs from VAT; (a) A VAT-registered person whose sales are made to embassies
custody is included in the gross selling price; (c) Liable to both the 12% VAT and 7% gross receipts tax; of foreign governments and United Nations agencies located
 in the Philippines without the BIR approval of the application (b) File a motion for reconsideration with the Commissioner of
for zero-rating; 2012 Bar, Q. (42): The public market vendor below, who is not a Internal Revenue;
(b) Any person who has excess input tax arising from local VAT-registered person is liable to VAT in 2010, if: (c) File an appeal to the Secretary of Finance within thirty (30)
purchases of taxable goods and services; days from receipt thereof;
(c) A VAT-registered person whose sales are made to clients in (a) She sells raw chicken and meats and her gross sales during (d) File an appeal to the Secretary of Justice within thirty (30)
the Philippines; the year is P2 Million; days from receipt thereof.
(d) A VAT-registered person whose sales are made to (b) She sells vegetables and fruits in her stall and her gross sales
customers outside the Philippines and who issued VAT during the year is P1 Million; A: (c). Sec. 4, NIRC
invoices or receipts with the words "ZERO RATED SALES" (c) She sells canned goods, processed coconut oils, and cut
imprinted on the sales invoices or receipts. flowers in her stall and her gross sales during the year is 2012 Bar, Q. (46): On April 15, 2011, the Commissioner of
P2.5 Million; Internal Revenue mailed by registered mail the final assessment
A: (d). Kepco Phils. Corp. v. CIR, G.R. No. 179961, January 31, 2011 (d) She sells live fish, shrimps, and crabs and her gross sales notice and the demand letter covering the calendar year 2007
during the year is P5 Million. with the QC Post Office. Which statement is correct?
2012 Bar, Q. (39): A hotel operator that is a VAT-registered
person and who leases luxury vehicles to its hotel customers is: A: (c). Sec. 105 & 109, NIRC (a) The assessment notice is void because it was mailed beyond
the prescriptive period;
(a) Subject to the 3% common carriers tax and 12% VAT; 2012 Bar, Q. (43): Which statement is FALSE under the VAT law? (b) The assessment notice is void because it was not received by
(b) Subject to the 3% common carriers tax only; the taxpayer within the three-year period from the date of
(c) Subject to the 12% VAT only; (a) A VAT-registered person will be subject to VAT for his filing of the tax return;
(d) Exempt from both the 3% common carriers tax and 12% taxable transactions, regardless of his gross sales or receipts; (c) The assessment notice is void if the taxpayer can show that
VAT. (b) A person engaged in trade or business selling taxable goods the same was received only after one (1) month from date of
or services must register as a VAT person, when his gross mailing;
A: (c). Sec. 108, NIRC sales or receipts for the year 2011 exceed P1.5 Million; (d) The assessment notice is valid even if the taxpayer received
(c) A person who issued a VAT-registered invoice or receipt for the same after the three-year period from the date of filing
2012 Bar, Q. (40): Which statement is correct? A bar review a VAT-exempt transaction is liable to the 12% VAT as a of the tax return.
center owned and operated by lawyers is: penalty for the wrong issuance thereof;
(d) Once a doctor of medicine exercises his profession during A: (d). Sec. 203, NIRC; BPI v. CIR, G.R. No. 139736, October 17,
(a) Exempt from VAT, regardless of its gross receipts during the the year, he needs to register as a VAT person and to issue 2005
year because it is an educational center; VAT receipts for professional fees received.
(b) Exempt from VAT, provided that its annual gross receipts 2012 Bar, Q. (47): A preliminary Assessment Notice (PAN) is NOT
do not exceed P1.5 Million in 2011; A: (d). Sec. 236(G)(1)(b), NIRC required to be issued by the BIR before issuing a Final
(c) Subject to VAT, regardless of its gross receipts during the Assessment Notice (FAN) on one of the following cases:
year; 2012 Bar, Q. (44): The Commissioner of Internal Revenue may
(d) Subject to VAT, if it is duly accredited by TESDA. NOT inquire into the bank deposits of a taxpayer, except: (a) When a taxpayer does not pay the 2010 deficiency income
tax liability on or before July 15 of the year;
A: (b). Sec. 109(V), NIRC (a) When the taxpayer files a fraudulent return; (b) When the finding for any deficiency tax is the result of
(b) When the taxpayer offers to compromise the assessed tax mathematical error in the computation of the tax as
2012 Bar, Q. (41): For 2012, input tax is not available as a credit based on erroneous assessment; appearing on the face of the return;
against the output tax of the buyer of taxable goods or services (c) When the taxpayer offers to compromise the assessed tax (c) When a discrepancy has been determined between the
during the quarter, if: based on financial incapacity to pay and he authorizes the value added tax paid and the amount due for the year;
Commissioner in writing to look into his bank records; (d) When the amount of discrepancy shown in the Letter Notice
(a) The VAT invoice or receipt of the seller is registered with the (d) When the taxpayer did not file his income tax return for the is not paid within thirty (30) days from date of receipt.
BIR; year.
(b) The VAT invoice or receipt of the seller does not separately A: (b). Sec. 228, NIRC
indicate the gross selling price or gross receipts and the A: (c). Sec. 6(F), NIRC
VAT component therein; 2012 Bar, Q. (48): When a protest against the deficiency income
(c) The VAT invoice or receipt is issued in the name of the VAT- 2012 Bar, Q. (45): The Commissioner of Internal Revenue issued tax assessment was denied by the BIR Regional Director of
registered buyer and his TIN is shown in said invoice or a BIR ruling to the effect that the transaction is liable to income Quezon City, the appeal to the Court of Tax Appeals must be
receipt; tax and value added tax. Upon receipt of the ruling, a taxpayer filed by a taxpayer:
(d) The VAT invoice or receipt issued by the seller shows the does not agree thereto. What is his proper remedy?
Taxpayer Identification Number plus the word "VAT" or "VAT (a) If the amount of basic tax assessed is P100,000.00 or more;
registered person". (a) File a petition for review with the Court of Tax Appeals (b) If the amount of basic tax assessed is P300,000.00 or more;
within thirty (30) days from receipt thereof; (c) If the amount of basic tax assessed is P500,000.00 or more;
A: (b). Sec. 113, NIRC (d) If the amount of basic tax assessed is P1 Million or more;
 (a) Compromise of a tax liability is available only at the
A: All the choices are correct. All decisions on disputed administrative level; (a) If the taxpayer files a request for reconsideration with the
assessments are appealable to the CTA (in Division) irrespective of (b) Compromise of a tax liability is available only before trial at Asst. Commissioner;
the amount (R.A. 9282, Sec. 3) the CTA; (b) If the taxpayer files a request for reinvestigation that is
(c) Compromise of a tax liability is available even during approved by the Commissioner of Internal Revenue;
appeal, provided that prior leave of court is obtained; (c) If the taxpayer changes his address in the Philippines that is
2012 Bar, Q. (49): The taxpayer received an assessment notice on
(d) Compromise of a tax liability is still available even after the communicated to the BIR official;
April 15, 2011 and filed its request for reinvestigation against the
court decision has become final and executory. (d) If a warrant of levy is served upon the taxpayer’s real
assessment on April 30, 2011. Additional documentary evidence
property in Manila.
in support of its protest was submitted by it on June 30, 2011. If
A: (c). RR 30-2002
no denial of the protest was received by the taxpayer, when is
A: (b). Sec. 223, NIRC; BPI v. Commissioner, G.R. No. 139736,
the last day for the filing of its appeal to the CTA?
2012 Bar, Q. (53): In case of full or partial denial of the written October 17, 2005
(a) November 30, 2011; claim for refund or excess input tax directly attributable to zero-
(b) December 30, 2011; rated sales, or the failure on the part of the Commissioner to act 2012 Bar, Q. (56): Which statement is correct? The collection of a
(c) January 30, 2012; on the application within 120 days from the date of submission deficiency tax assessment by distraint and levy:
(d) February 28, 2012. of complete documents, an appeal must be filed with the CTA:
(a) May be repeated, if necessary, until the full amount due,
A: (c). Sec. 228, NIRC (a) Within thirty (30) days after filing the administrative claim including all expenses, is collected;
with the BIR; (b) Must be done successively, first by distraint and then by
(b) Within sixty (60) days after filing the administrative claim levy;
2012 Bar, Q. (50): Using the same facts in the immediately
with the BIR; (c) Automatically covers the bank deposits of a delinquent
preceding number, but assuming that the final decision on the
(c) Within one hundred twenty (120) days after filing the taxpayer;
disputed assessment was received by the taxpayer on July 30,
administrative claim with the BIR; (d) May be done only once during the taxable year.
2011, when is the last day for filing of the appeal to the CTA?
(d) Within thirty (30) days from the receipt of the decision
denying the claim or after the expiration of the 120-day A: (a). Sec. 217, NIRC
(a) August 30, 2011;
period.
(b) September 30, 2011;
(c) December 30, 2011; 2012 Bar, Q. (57): The prescriptive period to file a criminal action
A: (d). Sec. 112(C), NIRC is:
(d) January 30, 2012.
In case of full or partial denial by the CIR, the taxpayer’s recourse (a) Ten (10) years from the date of discovery of the commission
A: (a). Sec. 228, NIRC (nearest answer but not a correct answer)
is to file an appeal before the CTA within 30 days from receipt of of fraud or non-filing of tax return;
the decision of the CIR. However, if after the 120-day period the (b) Five (5) years from the date of issuance of the final
Note: The period to appeal is within 30 days from receipt of the
CIR fails to act on the application for tax refund/credit, the assessment notice;
final decision by the Commissioner. The decision was received on
remedy of the taxpayer is to appeal the inaction of the CIR to CTA (c) Three (3) years from the filing of the annual tax return;
July 30, 2011 so the last day to perfect an appeal with the CTA is
within 30 days. (CIR v. Aichi Forging Company of Asia, Inc., G.R. (d) Five (5) years from the commission of the violation of the
August 29, 2011. It is thus clear that the question did not provide
No. 184823, October 6, 2010) law, and if the same be not known at the time, from the
for the CORRECT answer.
discovery thereof and the institution of judicial proceedings
2012 Bar, Q. (54): The submission of the required documents for its investigation and punishment.
2012 Bar, Q. (51): Which court has jurisdiction to determine if
within sixty (60) days from the filing of the protest is available
the warrant of distraint and levy issued by the BIR is valid and to
only where: A: (d). Sec. 281, NIRC
rule if the waiver of the Statute of Limitations was validly
effected?
(a) The taxpayer previously filed a Motion for Reconsideration 2012 Bar, Q. (58): The accused’s mere reliance on the
with the BIR official; representations made by his accountant, with deliberate refusal
(a) City Courts;
(b) The taxpayer previously filed a request for reconsideration or avoidance to verify the contents of his tax return and to
(b) Regional Trial Court;
with the BIR official; inquire on its authenticity constitutes:
(c) Court of Tax Appeals;
(c) The taxpayer previously filed a request for reinvestigation
(d) Court of Appeals.
with the BIR official; (a) Simple negligence;
(d) The taxpayer previously filed an extension to file a protest (b) Gross negligence;
A: (c). R.A. 9282, Sec. 7
with the BIR official. (c) Willful blindness;
(d) Excusable negligence.
2012 Bar, Q. (52): Which statement below on compromise of tax A: (c). Sec. 228, NIRC; RCBC v. CIR
liability is correct?
A: (c). People v. Kintanar, CTA E.B. Criminal Case No. 006, Dec. 3,
2012 Bar, Q. (55): The prescriptive period for the collection of 2010
the deficiency tax assessment will be tolled:
2012 Bar, Q. (59): The acquittal of the accused in the criminal
action for the failure to file income tax return and failure to (a) Legislative acts passed by the municipal council in the A: (b). Sec. 194, R.A. 7160
supply correct information will have the following consequence: exercise of its lawmaking authority are denominated as
resolutions and ordinances; 2012 Bar, Q. (65): The appraisal, assessment, levy and collection
(a) The CTA will automatically exempt the accused from any civil (b) Legislative acts passed by the municipal council in the of real property tax shall be guided by the following principles.
liability; exercise of its lawmaking authority are denominated as Which statement does NOT belong here?
(b) The CTA will still hold the taxpayer liable for deficiency resolutions;
income tax liability in all cases, since preponderance of (c) Legislative acts passed by the municipal council in the (a) Real property shall be appraised at its current and fair
evidence is merely required for tax cases; exercise of its lawmaking authority are denominated as market value;
(c) The CTA will impose civil or tax liability only if there was a ordinances; (b) Real property shall be classified for assessment purposes on
final assessment notice issued by the BIR against the (d) Both ordinances and resolutions are solemn and formal acts. the basis of its actual use;
accused in accordance with the prescribed procedures for (c) Real property shall be assessed on the basis of a uniform
issuing assessments, which was presented during the trial; A: (c). Sec. 2227, Revised Administrative Code of 1917 classification within each local political subdivision;
(d) The CTA will impose civil or tax liability, provided that a (d) The appraisal and assessment of real property shall be
computation of the tax liability is presented during the 2012 Bar, Q. (62): Which of the following statements is NOT a based on audited financial statements of the owner.
trial. test of a valid ordinance?
A: (d). Sec. 198, R.A. 7160
A: (c) or (d). Republic v. Patanao, G.R. No. L-22356, July 1, 1967; (a) It must not contravene the Constitution or any statute;
Castro v. Collector of Internal Revenue, G.R. No. L-12174, April 26, (b) It must not be unfair or oppressive; 2012 Bar, Q. (66): The Manila International Airport Authority
1962 (c) It must not be partial or discriminatory; (MIAA) is exempt from real property tax. Which statement
(d) It may prohibit or regulate trade. below is NOT correct?
2012 Bar, Q. (60): X Corporation had excess income tax payment
for the year 2008, which it chose to carry over in 2009. In filing A: (d). To be valid, an ordinance must not prohibit but may (a) MIAA is not a government-owned or controlled corporation
its 2009 corporate income tax return, it signified its intention (by regulate trade (Magtajas v. Pryce Properties Corporation, Inc., because it is not organized as a stock or non-stock
checking the small box "refund" at the bottom of the return) to G.R. No. 111097, July 20, 1994) corporation;
get a refund of the overpaid amount in 2008. Can the refund be (b) MIAA is a government instrumentality vested with corporate
allowed or not, and if disallowed, does X Corporation lose the 2012 Bar, Q. (63): Taxing power of local government units shall powers and performing essential public services;
claimed amount? NOT extend to the following taxes, except one: (c) MIAA is not a taxable entity because the real property is
owned by the Republic of the Philippines and the beneficial
(a) X Corporation may not get the refund because the decision (a) Income tax on banks and other financial institutions; use of such property has not been granted to a private
to carry over in 2008 was irrevocable for that year, and it (b) Taxes of any kind on the national government, its agencies entity;
may not change that decision in succeeding years; and instrumentalities, and local government units; (d) MIAA is a government-owned or controlled corporation
(b) X Corporation may not get the refund in 2009, but the (c) Taxes on agricultural and aquatic products when sold by the because it is required to meet the test of economic
amount being claimed as refund may be utilized in marginal farmers or fishermen; viability.
succeeding years until fully exhausted because there is no (d) Excise taxes on articles enumerated under the National
prescriptive period for carry-over of excess income tax Internal Revenue Code. A: (d), MIAA v. City of Pasay, G.R. No. 163072, April 2, 2009
payments;
(c) X Corporation may get the refund, provided that it will no A: (a). Sec. 186, R.A. 7160 2012 Bar, Q. (67): For purposes of real property taxes, the tax
longer carry over such amount or utilize the same against its
rates are applied on:
income tax liability in the future;
2012 Bar, Q. (64): Which statement on prescriptive periods is
(d) X Corporation may file instead a claim of tax credit, in lieu of
true? (a) Zonal values;
refund.
(b) Fair market value;
(c) Assessed values;
A: (b). Sec. 76, NIRC
(a) The prescriptive periods to assess taxes in the National (d) Reproduction values.
Internal Revenue Code and the Local Government Code are
The carryover of excess income tax payments is no longer limited
the same; A: (c). Sec. 233, R.A. 7160
to the succeeding taxable year. Unutilized excess income tax
(b) Local taxes shall be assessed within five (5) years from the
payments may now be carried over to the succeeding taxable
date they became due; 2012 Bar, Q. (68): One of the local government units below does
years until fully utilized. In addition, the option to carryover excess
(c) Action for the collection of local taxes may be instituted NOT have the power to impose real property tax:
income tax payments is now irrevocable. Hence, unutilized excess
after the expiration of the period to assess and to collect the
income tax payments may no longer be refunded. (Belle Corp. v.
tax; (a) Bacoor, Cavite;
CIR, G.R. No. 181298, January 10, 2011)
(d) Local taxes may be assessed within ten (10) years from (b) Davao City;
discovery of the underpayment of tax which does not (c) Tarlac Province;
2012 Bar, Q. (61): Which statement is correct? constitute fraud. (d) Malabon, Metro Manila.
 (d) When there is part payment of duties on the imported (d) Decisions of the BIR Commissioner in cases involving liability
A: (a). Sec 200, R.A. 7160 goods located in the customs area. for customs duties, seizure, detention or release of property
affected.
Note: The answer above is premised on the belief that Bacoor is a A: (b). Sec. 1202, TCC
municipality and the LGC does not vest municipalities with the A: (b). Sec. 7, R.A. 9282
power to impose real property taxes, except for municipalities 2012 Bar, Q. (72): A protest against an assessment issued by the
within the Metropolitan Manila area. However, Bacoor is already Collector of Customs for unpaid customs duties on imported 2012 Bar, Q. I(a): Anchor Banking Corporation, which was
a city hence, can no longer be a correct choice. Since the question goods shall be filed with: organized in 2000 and existing under the laws of the Philippines
did not provide for the CORRECT answer, it should be treated as a and owned by the Sy Family of Makati City, set up in 2010 a
bonus (a) The Commissioner of Customs; branch office in Shanghai City, China, to take advantage of the
(b) The Regional Trial Court; presence of many Filipino workers in that area and its booming
2012 Bar, Q. (69): Where the real property tax assessment is (c) The Court of Tax Appeals; economy. During the year, the bank, management decided not
erroneous, the remedy of the property owner is: (d) The Collector of Customs. to include the P20 Million net income of the Shanghai Branch in
the annual Philippine income tax return filed with the BIR, which
(a) To file a claim for refund in the Court of Tax Appeals if he has A: (d). Sec. 2308, TCC showed a net taxable income of P30 Million, because the
paid the tax, within thirty (30) days from date of payment; Shanghai Branch is treated as a foreign corporation and is taxed
(b) To file an appeal with the Provincial Board of Assessment 2012 Bar, Q. (73): The dutiable value of an imported article only on income from sources within the Philippines, and since
Appeals within thirty (30) days from receipt of the subject to an ad valorem rate of duty under existing law shall be: the loan and other business transactions were done in Shanghai,
assessment; these incomes are not taxable in the Philippines.
(c) To file an appeal with the Provincial Board of Assessment (a) The home consumption value;
Appeals within sixty (60) days from receipt of the (b) The total value; Is the bank correct in excluding the net income of its Shanghai
assessment; (c) The total landed cost; Branch in the computation of its annual corporate income tax for
(d) To file an appeal with the Provincial Board of Assessment (d) The transaction value. 2010? Explain your answer.
Appeals within sixty (60) days from receipt of the
assessment and playing the assessed tax under protest. A: (d). Sec. 201, TCC, as amended by R.A. 8181 dated March 28, A: No. A Domestic Corporation is taxable on all income derived
1996. from sources within and without the Philippines (Sec. 23, NIRC).
A: (c). Sec. 226, R.A. 7160 The income of the foreign branch and that of the Home Office will
be summed up for income tax purposes following the “single
2012 Bar, Q. (74): The imported articles shall in any case be entity” concept and will all be included in the gross income of the
2012 Bar, Q. (70): The City Government of Manila may NOT subject to the regular physical examination when: domestic corporation in the annual Philippine income tax return.
impose:
(a) The importer disagrees with the findings as contained in the
(a) Basic real property tax at 2% of the assessed value of real government surveyor’s report; 2012 Bar, Q. I(b): Anchor Banking Corporation, which was
property; (b) The number, weight and nature of packages indicated in organized in 2000 and existing under the laws of the Philippines
(b) Additional levy on real property for the special education the customs entry declaration and supporting documents and owned by the Sy Family of Makati City, set up in 2010 a
fund at 1% of the assessed value of real property; differ from that in the manifest; branch office in Shanghai City, China, to take advantage of the
(c) Additional ad valorem tax on idle lands at a rate not (c) The container is not leaking or damaged; presence of many Filipino workers in that area and its booming
exceeding 5% of the assessed value; (d) The shipment is covered by alert/hold orders issued economy. During the year, the bank, management decided not
(d) Special levy on lands within its territory specially benefited pursuant to an existing order. to include the P20 Million net income of the Shanghai Branch in
by public works projects or improvements funded by it at the annual Philippine income tax return filed with the BIR, which
80% of the actual cost of the projects or improvements. A: (b). Sec. 1401, TCC, as amended by R.A. 7650 showed a net taxable income of P30 Million, because the
Shanghai Branch is treated as a foreign corporation and is taxed
A: (d). Sec. 240, R.A. 7160 only on income from sources within the Philippines, and since
2012 Bar, Q. (75): Which cases are appealable to the CTA? the loan and other business transactions were done in Shanghai,
these incomes are not taxable in the Philippines.
2012 Bar, Q. (71): Importation of goods is deemed terminated: (a) Decisions of the Secretary of Finance in cases involving
liability for customs duties, seizure, detention or release of Should the Shanghai Branch of Anchor Bank remit profit to its
(a) When the customs duties are paid, even if the goods remain property affected; Head Office in the Philippines in 2011, is the branch liable to the
within the customs premises; (b) Decisions of the Commissioner of Customs in cases 15% branch profit remittance tax imposed under Section 28
(b) When the goods are released or withdrawn from the involving liability for customs duties, seizure, detention or (A)(5) of the 1997 Tax Code? Explain your answer
customs house upon payment of the customs duties or release of property affected;
with legal permit to withdraw; (c) Decisions of the Collector of Customs in cases involving No. The branch profit remittance tax is imposed only on
(c) When the goods enter Philippines territory and remain liability for customs duties, seizure, detention or release of remittances by branches of Foreign Corporation in the Philippines
within the customs house within thirty (30) days from date property affected; to their Home Office abroad. It is the outbound branch profits that
of entry;
is subject to the tax not the inbound profits (Sec. 28(A)(5), NIRC).
 equipment – P50 Million; and installation –P30 Million). Assume and complete transaction (Madrigal v. Rafferty, G.R. No. L-12287,
2012 Bar, Q. II(a): Foster Corporation (FC) is a Singapore-based that the project was 40% complete in 2010 and 100% complete August 7, 1918).
foreign corporation engaged in construction and installation in 2011, based on the certificates issued by the certificates
projects. In 2010, Global Oil Corporation (GOC), a domestic issued by the architects and engineers working on the project. 2012 Bar, Q. III(c): Mr. Jose Castillo is a resident Filipino Citizen.
corporation engaged in the refinery of petroleum products, GOC paid FC as follows: P60 Million in 2010 and P40 Million in He purchased a parcel of land in Makati City in 1970 at a
awarded an anti-pollution project to Foster Corporation, 2011, and FC paid PCC ion foreign currency through a Philippine consideration of P1 Million. In 2011, the land, which remained
whereby FC shall design, supply machinery and equipment, and bank as follows: P10 Million in 2010 and P20 Million in 2011. undeveloped and idle, had a fair market value of P20Million. Mr.
install an anti-pollution device for GOC’s refinery in the Antonio Ayala, another Filipino citizen, is very much interested
Philippines, provided that the installation part of the project Is PCC, which adopted the percentage of completion method of in the property and he offered to buy the same for P20 Million.
may be sub-contracted to a local construction company. reporting income and expenses, liable to value added tax in 2010 The Assessor of Makati City re-assessed in 2011 the property at
Pursuant to the contract, the design and supply contracts were and in 2011. Explain your answer. P10 Million.
done in Singapore by FC, while the installation works were sub-
contracted by the FC with the Philippine Construction A: Yes, PCC is liable to the VAT as seller of services for a fee. Should Mr. Castillo agree to sell the land to Mr. Ayala in 2012 for
Corporation (PCC), a domestic corporation. The project with a However, the sale of services to FC is subject to VAT at zero P20 Million, subject to the condition as stated in The Deed of
total cost of P100 Million was completed in 2011 at the following percent rate. Services rendered to a person engaged in business Sale that the buyer shall assume the capital gains tax thereon,
cost components: (design – P20Million; machinery and conducted outside the Philippines or to nonresident person not how much is the income tax due on the transaction and when
equipment – P50 Million; and installation –P30 Million). Assume engaged in business who is outside the Philippines when the must the tax return be filed and the tax be paid by the taxpayer?
that the project was 40% complete in 2010 and 100% complete services are performed paid in foreign currency inwardly remitted Explain your answer.
in 2011, based on the certificates issued by the certificates through the banking system are zero-rated sales of services (Sec.
issued by the architects and engineers working on the project. 108(B)(2), NIRC) A: He shall be liable to pay the 6% capital gains tax (CGT) based on
GOC paid FC as follows: P60 Million in 2010 and P40 Million in the Gross Selling Price of the Property which P20M plus the CGT
2011, and FC paid PCC ion foreign currency through a Philippine 2012 Bar, Q. III(a): Mr. Jose Castillo is a resident Filipino Citizen. assumed by the buyer. He should file the return within 30 days
bank as follows: P10 Million in 2010 and P20 Million in 2011. He purchased a parcel of land in Makati City in 1970 at a from date of the sale (date of notarization) and shall pay the tax
consideration of P1 Million. In 2011, the land, which remained as he files the return (Sec. 24(D), NIRC)
Is FC liable to Philippines income tax, and if so, how much undeveloped and idle, had a fair market value of P20Million. Mr.
revenue shall be reported by it in 2010 and in 2011? Explain your Antonio Ayala, another Filipino citizen, is very much interested 2012 Bar, Q. IV(a): Mr. Pedro Aguirre, a resident citizen, is
answer. in the property and he offered to buy the same for P20 Million. working for a large real estate development company in the
The Assessor of Makati City re-assessed in 2011 the property at country and in 2010, he was promoted to Vice-President of the
A: No. FC is not liable to Philippine income tax. The revenues from P10 Million. company. With more responsibilities comes higher pay. In 2011,
the design and supply contracts having been all done in Singapore
he decided to buy a new car worth P2 Million and he traded-in
are income from without, hence, not taxable to a foreign When is Mr. Castillo liable for real property tax on the land his old car with a market value of P800,000.00 and paid the
corporation in the Philippines (Sec. 42, NIRC; CIR v. Marubeni beginning 2011 or beginning 2012? Explain your answer. difference of P1.2 Million to the car company. The old car, which
Corporation, G.R. No. 137377, December 18, 2001). Also, with
was bought three (3) years ago by the father of Mr. Pedro
respect to the installation of the project which are services A: Mr. Castillo shall be liable to the real property tax based on the Aguirre at price of P700,000.00 was donated by him and
performed within, the same is sub-contracted to PCC, a domestic re-assessment beginning 2012. All re-assessments made after the registered in the name of his son. The corresponding donor’s tax
corporation. Since FC has no branch or permanent establishment first day of any year shall take effect on the first day of January of thereon was duly paid by the father.
in the Philippines, business profits earned by it pursuant to our the succeeding year (Sec. 221, LGC).
treaty with Singapore are exempt from income tax.
How much is the cost basis of the old car to Mr. Aguirre? Explain
2012 Bar, Q. III(b): Mr. Jose Castillo is a resident Filipino Citizen. your answer
2012 Bar, Q. II(b): Foster Corporation (FC) is a Singapore-based He purchased a parcel of land in Makati City in 1970 at a
foreign corporation engaged in construction and installation consideration of P1 Million. In 2011, the land, which remained A: P700,000. The basis of the property in the hands of the done is
projects. In 2010, Global Oil Corporation (GOC), a domestic undeveloped and idle, had a fair market value of P20Million. Mr. the carry-over basis (Sec. 40(B)(3), NIRC)
corporation engaged in the refinery of petroleum products, Antonio Ayala, another Filipino citizen, is very much interested
awarded an anti-pollution project to Foster Corporation, in the property and he offered to buy the same for P20 Million. 2012 Bar, Q. IV(b): Mr. Pedro Aguirre, a resident citizen, is
whereby FC shall design, supply machinery and equipment, and The Assessor of Makati City re-assessed in 2011 the property at working for a large real estate development company in the
install an anti-pollution device for GOC’s refinery in the P10 Million. country and in 2010, he was promoted to Vice-President of the
Philippines, provided that the installation part of the project
company. With more responsibilities comes higher pay. In 2011,
may be sub-contracted to a local construction company. Is Mr. Castillo liable for income tax in 2011 based on the offer to he decided to buy a new car worth P2 Million and he traded-in
Pursuant to the contract, the design and supply contracts were buy by Mr. Ayala? Explain your answer. his old car with a market value of P800,000.00 and paid the
done in Singapore by FC, while the installation works were sub-
difference of P1.2 Million to the car company. The old car, which
contracted by the FC with the Philippine Construction A: No. Mr. Castillo is not liable for income tax in 2011 because no was bought three (3) years ago by the father of Mr. Pedro
Corporation (PCC), a domestic corporation. The project with a income is realized by him during that year. Tax liability for income Aguirre at price of P700,000.00 was donated by him and
total cost of P100 Million was completed in 2011 at the following tax attaches only if there is a gain realized resulting from a closed registered in the name of his son. The corresponding donor’s tax
cost components: (design – P20Million; machinery and
thereon was duly paid by the father.
 2012 Bar, Q. V(b): Spouses Pablo Gonzales and Teresita of presentation of additional introduced for examination
What is the nature of the old car – capital asset or ordinary Gonzales, both resident citizens acquire during their marriage a evidence. for the first time.
asset? Explain your answer. residential house and lot located in Makati City, which is being It does not suspend the It suspends the prescriptive
leased to a tenant for a monthly rental of P100,000.00. Mr. period to collect the period to collect
A: The old car is a capital asset. It is property held by the taxpayer Pablo Gonzales is the President of PG Corporation and he deficiency tax
(whether or not connected with his trade or business), but is not receives P50,000.00 salary per month. The spouses have only
stock in trade of the taxpayer or other property of a kind which one (1) minor child. In late June 2010, he was immediately 2012 Bar, Q. VI(b): The BIR issued in 2010 a final assessment
would properly be included in the inventory of the taxpayer if on brought to the hospital because of the heart attack and he was notice and demand letter against X Corporation covering
hand at the close of the taxable year, or property held by the pronounced dead on June 30, 2010.With no liabilities, the estate deficiency income tax for the year 2008 in the amount of P10
taxpayer primarily for sale to customers in the ordinary course of of the late Pablo Gonzales was settled extra-judicially in early Million. X Corporation earlier requested the advice of a lawyer
his trade or business, or property used in the trade or business, of 2011. on whether or not it should file a request for reconsideration or
a character which is subject to the allowance for depreciation; or a request for reinvestigation. The lawyer said it does not matter
real property used in trade or business of the taxpayer (Sec. 39, Is Mrs. Teresita Gonzales required to file income tax return fot whether the protest files against the assessment is a request for
NIRC). 2010? If so, how much income must she declare for the year? reconsideration or a request for reinvestigation, because it has
How much personal exemption is she entitled to? Explain your same consequences or implications.
2012 Bar, Q. IV(c): Mr. Pedro Aguirre, a resident citizen, is answer.
working for a large real estate development company in the Do you agree with the advice of the lawyer? Explain your
country and in 2010, he was promoted to Vice-President of the A: Yes. Rental Income P600,000 (P300,000 share for January to answer.
company. With more responsibilities comes higher pay. In 2011, June 2010 & P300,000 representing his interest in the income
he decided to buy a new car worth P2 Million and he traded-in from the properties comprising the estate for the period July to A: No, in view of the difference between Request for
his old car with a market value of P800,000.00 and paid the December). The share of the minor child in the rental income Reconsideration and Request for Reinvestigation.
difference of P1.2 Million to the car company. The old car, which (P300,000) earned after death is not included in the return of the
was bought three (3) years ago by the father of Mr. Pedro parent pursuant to Sec. 51(E) of the Tax Code
2012 Bar, Q. VII(a): May the bank deposits – peso and foreign
Aguirre at price of P700,000.00 was donated by him and currency of an individual taxpayer be disclosed by a commercial
registered in the name of his son. The corresponding donor’s tax 2012 Bar, Q. V(c): Spouses Pablo Gonzales and Teresita Gonzales, bank to the Commissioner of Internal Revenue, in connection
thereon was duly paid by the father. both resident citizens acquire during their marriage a residential with a tax investigation being conducted by revenue officials,
house and lot located in Makati City, which is being leased to a without violating the relevant bank secrecy laws? Explain your
Is Mr. Aguirre liable to pay income tax on the gain from the sale tenant for a monthly rental of P100,000.00. Mr. Pablo Gonzales answer.
of his old car? Explain your answer. is the President of PG Corporation and he receives P50,000.00
salary per month. The spouses have only one (1) minor child. In A: No. As a general rule, bank deposits of an individual taxpayer
A: Yes. Capital gain is P100,000. The amount of the taxable gain is late June 2010, he was immediately brought to the hospital may not be disclosed by a commercial bank to the Commissioner.
subject to the withholding period of the asset (Sec. 39, NIRC). because of the heart attack and he was pronounced dead on As exceptions, the Commissioner is authorized to inquire into the
June 30, 2010.With no liabilities, the estate of the late Pablo bank deposits of:
2012 Bar, Q. V(a): Spouses Pablo Gonzales and Teresita Gonzales was settled extra-judicially in early 2011.
Gonzales, both resident citizens acquire during their marriage a (1) A decedent to determine his gross estate; and
residential house and lot located in Makati City, which is being Is the Estate of the late Pablo Gonzales required to file income (2) Any taxpayer who has filed an application for compromise of
leased to a tenant for a monthly rental of P100,000.00. Mr. tax return for 2010? If so, how much income must it declare for his tax liability by reason of financial incapacity to pay his tax
Pablo Gonzales is the President of PG Corporation and he the year? How much personal exemption is it entitled to? liability.
receives P50,000.00 salary per month. The spouses have only Explain your answer.
one (1) minor child. In late June 2010, he was immediately In case a taxpayer files an application to compromise the payment
brought to the hospital because of the heart attack and he was A: No. It has acquired no tax personality because the estate is not of his tax liabilities on his claim that his financial position
pronounced dead on June 30, 2010.With no liabilities, the estate under judicial settlement. The income of the properties is taxable demonstrates a clear inability to pay the tax assessed, his
of the late Pablo Gonzales was settled extra-judicially in early to the heirs in their individual capacity in accordance with their application shall not be considered unless and until he waives in
2011. respective interest in the inheritance. writing his privilege under R.A. 1405 (Bank Secrecy Law) or under
Is Mr. Pablo Gonzales required to file income tax for 2010? If so, other general or special laws, and such waiver shall constitute the
how much income must he declare for the year? How much authority of the Commissioner to inquire into the bank deposits of
personal and additional exemption is he entitled to? Explain your the taxpayer (Sec. 6, NIRC).
answer. 2012 Bar, Q. VI(a): What are the differences between a request
for reconsideration and a request for reinvestigation? 2012 Bar, Q. VII(b): In 2011, the Commissioner of the U.S.
A: Yes. Income to be Declared: P600,00 (Rental Income P300,000 Internal Revenue Service (IRS) requested in writing the
& Salary P300,000); Personal and Additional Exemption P75,000 Request for Reconsideration Request for Reinvestigation Commissioner of Internal Revenue to get the information from a
(Basic of P50,000 & P25,000 for one minor child) Plea for evaluation of Plea for re-evaluation on the bank in the Philippines, regarding the deposits of a U.S. Citizen
assessment on the basis of basis of newly discovered residing in the Philippines, who is under examination by the
existing records without need evidence which are to be officials of the US IRS, pursuant to the US-Philippine Tax Treaty
and other existing laws. Should the BIR Commissioner agree to a protest against the Formal Letter of Demand with Assessment tax in the succeeding years, considering that there is no
obtain such information from the bank and provide the same to Notices since the language used and the tenor of the demand prescriptive period provided for in the income tax law with
the IRS? Explain your answer. letter indicate that it is the final decision of the respondent on the respect to carry over of excess income tax payments? Explain
matter. The CIR should indicate, in a clear and unequivocal your answer.
A: Yes. The Commissioner should agree to the request pursuant to language, whether his action on a disputed assessment
the principle of international comity. The Commissioner of constitutes his final determination thereon in order for the A: Yes. The carry-over of excess income tax payments is no longer
Internal Revenue has the authority to inquire into bank deposit taxpayer concerned to determine when his or her right to appeal limited to the succeeding taxable year. Unutilized excess income
accounts and related information held by financial institutions of a to the tax court accrues. Although there was no direct reference tax payments may now be carried over to the succeeding taxable
specific taxpayer subject of a request for the supply of tax for the taxpayer to bring the matter directly to the CTA, it cannot years until fully utilized. In addition, the option to carry-over
information from a foreign tax authority pursuant to an be denied that the word “appeal” under prevailing tax laws refers excess income tax payments is now irrevocable. Hence, unutilized
international convention or agreement to which the Philippines is to the filing of a Petition for Review with the CTA (Allied Bank vs. excess income tax payments may no longer be refunded (Belle
a signatory or party of (Sec. 3, RA 10021). CIR, G.R. No. 175097, February 5, 2010). Corp. v. CIR, G.R. No. 181298, January 10, 2011).

2012 Bar, Q. VII(c): Is the bank secrecy law in the Philippines 2012 Bar, Q. IX(a): On April 16, 2012, the corporation filed its 2012 Bar, Q. X(a): Explain the following statements: The
violated when the BIR issues a Warrant of Garnishment directed annual corporate income tax return for 2011, showing an acquittal of the taxpayer in a criminal action under the Tax Code
against a domestic bank, requiring it not to allow any overpayment of income tax of P1 Million. Which is to be carried does not necessarily result in a exoneration of said taxpayer
withdrawal from any existing bank deposit of the delinquent over to the succeeding year(s). On May 15, 2012, the corporation from his civil liability to pay taxes.
taxpayer mentioned in the Warrant and to freeze the same until sought advice from you and said that it contemplates to file an
the tax delinquency of said taxpayer is settled with the BIR? amended return for 2011, which shows that instead of carry- A: In taxation, the taxpayer becomes criminally liable because of a
Explain your answer. over of the excess income tax payment, the same shall be civil liability. While he may be acquitted on the criminal case, his
considered as a claim for tax refund and the small box shown as acquittal could not operate to discharge him from the duty to pay
A: No. Garnishment is an administrative remedy allowed by law to "refund" in the return will be filled up. Within a year, the tax, since that duty is imposed by statute prior to and
enforce a tax liability. Bank accounts shall be garnished by serving corporation will file the formal request for refund for the excess independent of any attempt on the taxpayer to evade payment.
a warrant of garnishment upon the taxpayer and upon the payment. The obligation to pay the tax is not a mere consequence of the
president, manager, treasurer or other responsible officer of the felonious acts charged in the information, nor is a mere civil
bank. Upon receipt of the warrant of garnishment, the bank shall Will you recommend to the corporation such a course of action liability derived from crime that would be wiped out by the
turn over to the Commissioner so much of the bank accounts as and justify that the amended return is the latest official act of declaration that the criminal acts charged did not exist (Castro v.
may be sufficient to satisfy the claim of the Government (Sec. 208, the corporation as to how it may treat such overpayment of tax Collector of Internal Revenue, L-12174, April 26, 1962).
NIRC) or should you consider the option granted to taxpayers as
irrevocable, once previously exercised by it? Explain your 2012 Bar, Q. X(b): Explain the following statements: Should the
2012 Bar, Q. VIII: In the examination conducted by the revenue answer. accused be found guilty beyond reasonable doubt for violation
officials against the corporate taxpayer in 2010, the BIR issued a of Section 255 of the Tax Code for failure to file tax return or to
final assessment notice and demand letter which states: "It is A: Once the option to carry-over and apply the excess quarterly supply correct information), the imposition of the civil liability by
requested that the above deficiency tax be paid immediately income tax against income tax against income tax due for the the CTA should be automatic and no assessment notice from the
upon receipt hereof, inclusive of penalties incident to taxable quarters of the succeeding taxable years has been made BIR is necessary?
delinquency. This is our final decision based on investigation. If such option shall be considered IRREVOCABLE for the taxable year
you disagree, you may appeal this final decision within thirty period and no application for tax refund or issuance of tax credit A: Yes. If the failure to file tax return or to supply correct
(30) days from receipt hereof, otherwise said deficiency tax certificate shall be allowed therefore (Sec. 76, NIRC). information resulted to unpaid taxes the amount of which is
assessment shall become final, executory and demandable." The proven during trial, the CTA shall not only impose the criminal
assessment was immediately appealed by the taxpayer to the 2012 Bar, Q. IX(b): On April 16, 2012, the corporation filed its penalty but must likewise order the payment of the civil liability
Court of Tax Appeals, without filing its protest against the annual corporate income tax return for 2011, showing an (Sec. 205(b), NIRC). As a matter of fact, it is well-recognized that in
assessment and without a denial thereof by the BIR. If you were overpayment of income tax of P1 Million. Which is to be carried the case of failure to file a return, a proceeding in court for the
the judge, would you deny the petition for review filed by the over to the succeeding year(s). On May 15, 2012, the corporation collection of the tax may be filed without the need of an
taxpayer and consider the case as prematurely filed? Explain sought advice from you and said that it contemplates to file an assessment, which recognizes that the civil liability of a taxpayer
your answer. amended return for 2011, which shows that instead of carry- maybe established without the need of an assessment (Sec.
over of the excess income tax payment, the same shall be 222(a), NIRC).
A: No. The Petition for Review should not be denied. The case is considered as a claim for tax refund and the small box shown as
an exception to the rule on exhaustion of administrative "refund" in the return will be filled up. Within a year, the
remedies. The BIR is estopped from claiming that the filing of the corporation will file the formal request for refund for the excess
Petition for Review is premature because the taxpayer failed to payment.
exhaust all administrative remedies. The statement of the BIR in
its Final Assessment Notice and Demand Letter led the taxpayer to Should the petition for review filed with the CTA on the basis of
conclude that only a final judicial ruling in his favor would be the amended tax return be denied by the BIR and the CTA, could
accepted by the BIR. The taxpayer cannot be blamed for not filing the corporation still carry over such excess payment of income