Bar Questions For Agency Trust and Partn
Bar Questions For Agency Trust and Partn
No, the deficiency tax assessment and warrant of distraint All the homeowners belonging to ABC Village Homeowners’
and/or levy issued against KLM Corp. are not valid because Association elected a new set of members of the Board of
KLM Corp. did not receive a PAN. After the investigation of Trustees for the Association effective January 2019. The first
BIR, if it is determined that there exists sufficient basis to thing that the Board looked into is the need to increase the
assess the taxpayer for any deficiency tax or taxes, the BIR prevailing association dues. Mr. X, one of the trustees,
shall issue to the taxpayer, at least by registered mail, a proposed an increase of 100% to account for the payment of
the 12% value-added tax (VAT) on the association dues which
PAN for the proposed assessment, showing in detail the facts were being collected for services allegedly rendered “in the
and the law on which the assessment is based. The taxpayer course of trade or business” by ABC Village Homeowners’
must be informed of his liability for deficiency taxes through a Association.
PAN and the non-service of a PAN is fatal to the validity of the
assessment.
SUGGESTED ANSWERS:
Gifts made to or for the use of the National Government or any The family home must be the actual residential home of the
entity created by any of its agencies which is not conducted for decedent and his family at the time of his death, as certified by
profit, or to any political subdivision of the said Government; the barangay captain of the locality where the family home is
and, situated;
Gifts in favor of an educational and/or charitable, religious, The total value of the family home must be included as part of
cultural or social welfare corporation, institution, accredited the gross estate of the decedent; and
nongovernment organization, trust or philanthropic
organization or research institution or organization, not more Allowable deduction must be an amount equivalent to the
than 30% of said gifts shall be used by such donee for current fair market value of the decedent’s family home as
administration purposes. declared or included in the gross estate; or the extent of the
decedent’s interest (whether conjugal/community, or exclusive
No, the transaction does not fall under any of the exemption. property, whichever is lower, but not exceeding 10, 000,000.00
However, the transaction may still be exempt from donor’s tax pesos. ( R.R. No. 12-2018, Sec 6(7) (7.2)).
even when the shares of stock were sold on a selling price that
is less than the fair market value of the shares provided that Considering that all the said requisites are complied with, the
the sale is made in the ordinary course of business, in a Php 10,000,000.00 pesos, the amount pertaining to the value
transaction which is a bona fide, at arm’s length, and free from of the decedent’s family home is deductible from the gross
any donative intent. estate of A.
A.5.
On the other hand, tax deductions are the amounts which the
Aggrieved, XYZ Air filed a protest, arguing that, as a non-
law allows to be subtracted from gross income in order to
resident foreign corporation, it should only be taxed for income
arrive at net income.
derived from sources within the Philippines. However, since it
only serviced passengers outside the Philippine territory, the
situs of the income from its ticket sales should be considered
outside the Philippines. Hence, no income tax should be A.8.
imposed on the same.
SUGGESTED ANSWER:
A.9.
The following are the distinctions between an ordinary asset With regard to the second contention, ABC Corp is incorrect.
from a capital asset: Under the LGC, LGU’s are empowered to enact ordinances
that will aid in their revenue generation, which is consonance
As to taxability, an ordinary asset is subject to income tax; with the principle of the fiscal autonomy of LGU’s. Although the
whereas, a capital asset is subject to capital gains tax; tax to be imposed is akin to VAT, the LGU may nevertheless
impose such local business tax.
As to nature, as a rule, an ordinary asset is regularly used in
the normal course of trade or business; whereas, a capital
asset is an asset not regularly used in the normal course of
trade or business B.11.
With regard to Mr. D’s Lotto winnings, it is not subject to Philippines less than 180 days, are considered to be not
income tax. Under the NIRC, any winnings through the PCSO engaged in trade or business. In this case, Mr. J only stayed
Lotto that are in the amount of P10,000 or less shall be exempt for five months or 150 days in the Philippines. Hence, he is
from income tax. In this case, Mr. D won P5,000 thru the considered as a NRANETB, and shall be subjected to flat rate
PCSO Lotto. Hence, it shall not be subject to income tax. of 25% based on gross income earned within the Philippines.
B.12. B.13.
JKL-Philippines is a domestic corporation affiliated with JKL- As a way to augment the income of the employees of DEF Inc.,
Japan, a Japan-based information technology company with a private corporation, the management decided to grant a
affiliates across the world. Mr. F is a Filipino engineer special stipend of P50,000.00 for the first vacation leave that
employed by JKL-Philippines. In 2018, Mr. F was sent to the any employee takes during a given calendar year. In addition,
Tokyo branch of JKL-Japan based on a contract entered into the senior engineers were also giving housing inside the
between the two (2) companies. Under the said contract, Mr. F factory compound for the purpose of ensuring that there are
would be compensated by JKL-Philippines for the months available engineers within the premises everytime there is a
spent in the Philippines, and JKL-Japan for months spent in breakdown in the factory machineries and equipment.
Japan. For the entirety of 2018, Mr. F spent ten (10) months in
the Tokyo branch.
No, the BIR is not correct in basing its income tax assessment Is the City Assessor correct in including the land in its
on Mr. F’s worldwide income. Under the NIRC, non-resident assessment of RPT against V Corp., even if the same is
citizens are only taxed for income earned within the owned by City R? Explain (3%)
Philippines. In this case, the hybrid status of the taxpayer
cannot be applied, regardless of his initial 2-month stay in the
Philippines and subsequent transfer to Japan. For all intents
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and purposes, F is considered a non-resident citizen in the
year 2018. Hence, the income tax for 2018 should only be
assessed on income earned within the Philippines.
Yes. Under Section 234 of the Local Government Code, real
No, the BIR is not correct in basing its income tax on Mr. J’s property owned by the Republic of the Philippines or any of its
income within the Philippines at a schedular rate. Under the
political subdivision is exempt from payment of real property Who are the withholding agents in the case of: 1. The 20%
tax except when the beneficial use thereof has been granted, final withholding tax; and 2. The 2% creditable withholding tax?
for consideration or otherwise, to a taxable person or entity. Explain. (2.5%)
When is the deadline for filing a judicial claim for refund for any
excess or erroneous taxes paid in the case of: 1. The 20% final
B.15. withholding tax; and 2. The 2% creditable withholding tax?
(2.5%)
SUGGESTED ANSWER:
Mr. C is employed as a Chief Executive Officer of MNO
Company, receiving an annual compensation of
P10,000,000.00 while Mr. S is a security guard in the same
company earning an annual compensation of P200,000.00. For the 20% final withholding tax, the withholding agent is ABC
Both of them source their income only from their employment Bank being in control of the payment subject to withholding tax.
with MNO Company. (R.R. 2-98, Sec. 2.57.3). On the other hand, XYZ Corporation
is the withholding agent for the 2% creditable withholding tax
being the party paying for the interest payments on the loan
secured, and being listed as a top 20,000 Philippine
At the end of the year, is Mr. C personally required to file an Corporation by the BIR. (RR No. 6-2009).
annual income tax return? Explain. (2.5%)
The deadline for filing a judicial claim for refund for any excess
How about Mr. S? Is he personally required to file an annual or erroneous taxes paid for both the (1) 20% final withholding
income tax return? Explain. (2.5%) tax and (2) the 2% creditable withholding tax is two
SUGGESTED ANSWER: (2) years from the date of payment of the tax. (Section 229,
NIRC).
SUGGESTED ANSWER:
Here, T Corp. received the FAN on April 11, 2016. T. Corp has For value-added tax (VAT) refunds, Section 112 of the Tax
until May 11, 2016 to protest the same. However, T Corp. only Code provides that the taxpayer, whose sales are zero-rated or
filed the protest letter on June 25, 2016. effectively zero-rated, has two years after the close of the
taxable quarter when the sales were made, to apply for an
administrative claim for refund. Thereafter, the Commissioner
Thus, the motion to dismiss should be granted. of Internal Revenue (CIR) has 120 days from the submission of
complete supporting documents to act upon the claim for
refund. In case of full or partial denial of the claim or failure of
the CIR to act on the application within 120 days, the taxpayer
B.19. may appeal with the Court of Tax Appeals (CTA) within 30
days from receipt of the decision or upon expiration of the 120-
day period.
On May 10, 2011, the final withholding tax for certain income
payments to W Corp. was withheld and remitted to the Bureau
of Internal Revenue (BIR), and the corresponding return In the case of CIR vs. Aichi (GR No. 184823 dated October 6,
therefor was concomitantly filed on the same date. Upon 2010), the Supreme Court (SC) held that the observance of the
discovering that the amount 120-day period is a mandatory and jurisdictional requisite to
the filing of a judicial claim for refund before the CTA. As such,
its non- observance would warrant the dismissal of the judicial
claim for lack of jurisdiction.
withheld was excessive, W Corp. filed with the BIR a claim for
refund for erroneously withheld and collected final withholding
income tax on May 3, 2013. A week after, and without waiting
for any decision from the Commissioner of Internal Revenue B.20.
(CIR), W Cor. Filed a petition for review before the Court of
Tax Appeals (CTA) to make sure that the petition was filed
within the two (2)-year period for claiming refunds.
ABC, Inc. owns a 950-square meter commercial lot in Quezon
City. It received a notice of assessment from the City
Assessor, subjecting the property to real property taxes (RPT).
In resisting the claim, the BIR contended that the claim must Believing that the assessment was erroneous, ABC, Inc. filed a
be dismissed by the CTA on the ground of non-exhaustion of protest with the City Treasurer. However, for failure to pay the
administrative remedies because it did not give the CIR the RPT, the City Treasurer dismissed the protest.
opportunity to act on the claim of refund.
Assuming that the claim for refund filed by W Corp. is for Assuming that ABC, Inc. decides to appeal the dismissal,
excess and/or unutilized input VAT for the second quarter of where should the appeal be filed. (2.5%)
2011, and for which the return was timely filed on July 25,
2011, would your answer be the same? Explain. (2.5%) SUGGESTED ANSWER:
SUGGESTED ANSWER: