2013 Bar Examinations in Taxation
Content
2013 BAR EXAMINATIONS TAXATION October 13, 2013 2:00P.M.- 6:00P.M. INSTRUCTIONS 1. This Questionnaire contains THIRTEEN (13) pages inclu ing these Instructions pages. Chec! the nu"#er o$ pages an the page nu"#ers at the upper right han corner o$ each page o$ this Questionnaire an "a!e sure it has the correct nu"#er o$ pages an their proper nu"#ers.
There are T%E&'E (1() Essa) Questions nu"#ere I to *II+ an T%ENT, ((-) .ultiple Choice Questions (.CQs) nu"#ere I to **+ to #e ans/ere /ithin $our (0) hours. The essa) portion contains 1uestions that are /orth 2-34o o$ the /hole e5a"ination+ /hile the .CQ portion contains 1uestions /orth (-34o.
(. Rea each 1uestion 6er) care$ull) an /rite )our ans/ers in )our 7ar E5a"ination Note#oo! in the sa"e or er the 1uestions are pose . %rite )our ans/ers onl) at the $ront+ not the #ac!+ page o$ e6er) sheet in )our Note#oo!. Note /ell the allocate percentage points $or each nu"#er+ 1uestion+ or su#8 1uestion. In )our ans/ers+ 9se the nu"#ering s)ste" in the 1uestionnaire. I$ the sheets pro6i e in )our E5a"ination Note#oo! are not su$$icient $or )our ans/ers+ use the #ac! pages o$ e6er) sheet o$ )our E5a"ination Note#oo!+ starting at the #ac! page o$ the $irst sheet an the #ac! o$ the succee ing sheets therea$ter.
3. :ns/er the Essa) 1uestions legi#l)+ clearl)+ an concisel). Start each nu"#er on a separate page. :n ans/er to a su#81uestion un er the sa"e nu"#er "a) #e /ritten continuousl) on the sa"e page an the i""e iatel) succee ing pages until co"plete . ,our ans/er shoul e"onstrate )our a#ilit) to anal);e the $acts presente #) the 1uestion+ to select the "aterial $ro" the i""aterial $acts+ an to iscern the points upon /hich the 1uestion turns. It shoul sho/ )our !no/le ge an un erstan ing o$ the pertinent principles an (
theories o$ la/ in6ol6e an their 1uali$ications an li"itations. It shoul e"onstrate )our a#ilit) to appl) the la/ to the gi6en $acts+ an to reason logicall) in a la/)er8li!e "anner to a soun conclusion $ro" the gi6en pre"ises. : "ere <,es< or <No< ans/er /ithout an) correspon ing e5planation or iscussion /ill not #e gi6en an) cre it. Thus+ al/a)s hrie=l6 #ut $ull) e5plain )our ans/ers althou>h the guestion oes not e5pressl) as! $or an e5planation. :t the sa"e ti"e+ re"e"#er that a co"plete e5planation oes not re1uire that )ou 6olunteer in$or"ation or iscuss legal octrines that are not necessar) or pertinent to the solution to the pro#le". ,ou o not nee to re8/rite or repeat the 1uestion in )our Note#oo!.
0. .CQs are to #e ans/ere #) /riting in )our Note#oo! the capital letter (:+ 7+ C+ ?+ or E) correspon ing to )our chosen ans/er. The .CQ ans/ers shoul #egin in the page $ollo/ing the last page o$ )our essa) ans/ers.
There is onl) one correct ans/er to e6er) .CQ@ choose the 7EST ans/er $ro" a"on( the o$$ere choices. Note that .so"e .CQs "a) nee care$ul anal)sis #oth o$ the 1uestions an the choices o$$ere .
A. .a!e sure )ou o not /rite )our na"e or an) e5traneous notels or istincti6e "ar!ingls on )our Note#oo! that can ser6e as i enti$)ing "ar!4s (such as na"es that are not in the gi6en 1uestions+ pra)ers+ or pri6ate notes to the E5a"iner).
%riting+ lea6ing or "a!ing an) istinguishing or i enti$)ing "ar! in the e5a" Note#oo! is consi ere cheating an can is1uali$) )ou $or the 7ar e5a"inations. ,ou can use the 1uestionnaire $or notes )ou "a) /ish4nee to /rite uring the e5a"ination.
H:N? IN ,OUR NOTE7OOB %ITH THIS QUESTIONN:IRE Q$%7i9
Chair"an (-13 7ar E5a"inations 3 ESS:, QUESTIONS
I. In its $inal a Cust"ent return $or the (-1- ta5a#le )ear+ :7C Corp. ha e5cess ta5 cre its arising $ro" its o6er8/ithhol ing o$ inco"e pa)"ents. It opte to carr) o6er the e5cess ta5 cre its to the $ollo/ing )ear. Su#se1uentl)+ :7C Corp. change its "in an applie $or a re$un o$ the e5cess ta5 cre its.
%ill the clai" $or re$un prosperD (Eo4o)
II. : group o$ philanthropists organi;e a non8stoc!+ non8pro$it hospital $or charita#le purposes to pro6i e "e ical ser6ices to the poor. The hospital also accepte pa)ing patients although none o$ its inco"e accrue to an) pri6ate in i6i ual@ all inco"e /ere plo/e #ac! $or the hospitalFs use an not "ore than 3-o4o o$ its $un s /ere use $or a "inistrati6e purposes. Is the hospital su#Cect to ta5 on its inco"eD I$ it is+ at /hat rateD (E34o)
III. :7C Corporation is registere as a hol ing co"pan) an has an o$$ice in the Cit) o$.a!ati. It has no actual #usiness operations. It in6este in another co"pan) an its earnings are li"ite to i6i en s $ro" this in6est"ent+ interests on its #an! eposits+ an $oreign e5change gains $ro" its $oreign currenc) account. The Cit) o$ .a!ati assesse :7C Corporation as a contractor or one that sells ser6ices $or a $ee. Is the Cit) o$.a!ati correctD (E34o)
I'. :tt). Ga"#ino is a partner in a general pro$essional partnership. The partnership co"putes its gross re6enues+ clai"s e uctions allo/e un er the Ta5 Co e+ an istri#utes the net inco"e to the partners+ inclu ing :tt). Ga"#ino+ in accor ance /ith its articles o$ partnership. In $iling his o/n inco"e ta5 return+ :tt). Ga"#ino clai"e e uctions that the partnership i not clai"+ such as purchase o$ la/ #oo!s+ 0 entertain"ent e5penses+ car "surance an car epreciation. The 7IR isallo/e the e uctions. %as the 7IR correctD (E34o)
'. .r. :gustin+ HA )ears ol an su$$ering $ro" an incura#le isease+ eci e to sell $or 6alua#le an su$$icient consi eration a house an lot to his son. He ie one )ear later. In the settle"ent o$ .r. :gustinFs estate+ the 7IR argue that the house an lot /ere trans$erre in conte"plation o$ eath an shoul there$ore $or" part o$ the gross estate $or estate ta5 purposes. Is the 7IR correctD (Ho4o)
'I. On Octo#er 1A+ (--A+ :7C Corp. i"porte 1+--- !ilos o$ steel ingots an pai custo"s uties an ':T to the 7ureau o$ Custo"s on the i"portation. On Ie#ruar) 1H+ (--J+ the 7ureau o$ Custo"s+ citing pro6isions o$ the Tari$$ an Custo"s Co e on post8au it+ in6estigate an assesse :7C Corp. $or e$icienc) custo"s uties an ':T. Is the 7ureau o$ Custo"s correctD (H34o)
'II. *,K &a/ O$$ices+ a la/ partnership in the Lhilippines an a ':T8registere ta5pa)er+ recei6e a 1uer) #) e8"ail $ro" Gains#urg Corporation+ a corporation organi;e un er the la/s o$ ?ela/are+ #ut the e8"ail ca"e $ro" Cali$ornia /here Gains#urg has an o$$ice. Gains#urg has no o$$ice in the Lhilippines an oes no #usiness in the Lhilippines. *,K &a/ O$$ices ren ere its opinion on the 1uer) an #ille Gains#urg USM1+--- $or the opinion. Gains#urg re"itte its pa)"ent through Citi#an! /hich con6erte the re"itte USM1 +--- to pesos an eposite the con6erte a"ount in the *,K &a/ O$$ices account. %hat are the ta5 i"plications o$ the pa)"ent to *,K &a/ O$$ices in ter"s o$ ':T an inco"e ta5esD (Ho4o) A 'III. .r. :"a o lease a piece o$ lan o/ne #) the .unicipalit) o$ Linagsa#itan an #uilt a /arehouse on the propert) $or his #usiness operations. The .unicipal :ssessor assesse .r. :"a o $or real propert) ta5es on the lan an the /arehouse. .r. :"a o o#Cecte to the assess"ent+ conten ing that he shoul not #e as!e to pa) realt) ta5es on the lan since it is "unicipal propert).
%as the assess"ent properD (Ao4o)
I*. In the settle"ent o$ the estate o$ .r. 7ar#era /ho ie intestate+ his /i$e renounce her inheritance an her share o$ the conCugal propert) in $a6or o$ their chil ren. The 7IR eter"ine that there /as a ta5a#le gi$t an thus assesse .rs. 7ar#era as a onor. %as the 7IR correctD (H34o)
*.
In (-1-+ pursuant to a &etter o$ :uthorit) (&:) issue #) the Regional ?irector+ .r. :#ce e /as assesse e$icienc) inco"e ta5es #) the 7IR $or the )ear (--J. He pai the e$icienc). In (-11+ .r. :#ce e recei6e another &: $or the sa"e )ear (--J+ this ti"e $ro" the National In6estigation ?i6ision+ on the groun that .r. :#ce eFs (--J return /as $rau ulent. .r. :#ce e conteste the &: on the groun that he can onl) #e in6estigate once in a ta5a#le )ear. ?eci e. (Ho4o)
*I. In (---+ .r. 7elen #ought a resi ential house an lot $or LI +---+---. He use the propert) as his an his $a"il)Fs principal resi ence. It is no/ )ear (-13 an he is thin!ing o$ selling the propert) to #u) a ne/ one. He see!s )our a 6ice on ho/ "uch inco"e ta5 he /oul pa) i$ he sells the propert). The total ;onal 6alue o$ the propert) is LA+---+--- an the $air "ar!et 6alue per the ta5 eclaration is L(+A--+---. He inten s to sell it $or LE+---+---.
%hat "aterial consi erations /ill )ou ta!e into account in co"puting the inco"e ta5D Llease e5plain the legal rele6ance o$ each o$ these consi erations. (H34o) E
*II. ,ou are the retaine ta5 counsel o$ :7C Corp. ,our client in$or"e )ou that the) ha6e #een irectl) approache /ith a proposal #) a 7IR insi er (i.e.+ a "i le ran! 7IR o$$icial) on the ta5 "atter the) ha6e re$erre to )ou $or han ling. The 7IR insi erFs proposal is to settle the "atter #) signi$icantl) re ucing the assess"ent+ #ut he /ill get A-N o$ the sa6ings arising $ro" the re uce assess"ent. %hat ta5+ cri"inal an ethical consi erations /ill )ou ta!e into account in gi6ing )our a 6iceD E5plain the rele6ance o$ each o$ these consi erations. (JN)
.U&TIL&E CHOICE QUESTIONS
I. :7C Corp. /as issol6e an li1ui ating i6i en s /ere eclare an pai to the stoc!hol ers. %hat ta5 conse1uence $ollo/sD (1 34o) (:) :7C Corp. shoul e uct a $inal ta5 o$ 1-N $ro" the i6i en s. eclare their gain $ro" their in6est"ent an pa) inco"e ta5
(7) The stoc!hol ers shoul at the or inar) rates.
(C) The i6i en s are e5e"pt $ro" ta5. (?) :7C Corp. shoul /ithhol a 1-N cre ita#le ta5.
II. .GC Corp. secure an inco"e ta5 holi a) $or A )ears as a pioneer in ustr). On the $ourth )ear o$ the ta5 holi a)+ .GC Corp. eclare an pai cash i6i en s to its stoc!hol ers+ all o$ /ho" are in i6i uals. :re the i6i en s ta5a#leD (1 34o) (:) The i6i en s are ta5a#le@ the ta5 e5e"ption o$ .GC Corp. oes not e5ten to its stoc!hol ers. (7) The i6i en s are ta5 e5e"pt #ecause o$ .GC Corp.Fs inco"e ta5 holi a). (C) The i6i en s are ta5a#le i$ the) e5cee A-N o$ .GC Corp.Fs retaine earnings. (?) The i6i en s are e5e"pt i$ pai #e$ore the en o$ .GC Corp.Fs $iscal )ear. H III. .r. :las sells shoes in .a!ati through a retail store. He pa)s the ':T on his gross sales to the 7IR an the "unicipal license ta5 #ase on the sa"e gross sales to the Cit) o$ .a!ati. He co"es to )ou $or a 6ice #ecause he thin!s he is #eing su#Cecte to ou#le ta5ation. %hat a 6ice /ill )ou gi6e hi"D (1 34o) (:) ,es+ there is ou#le ta5ation an it is oppressi6e. (7) The Cit) o$.a!ati oes not ha6e this po/er. (C) ,es+ there is ou#le ta5ation an this is illegal " the Lhilippines.
(?) ?ou#le ta5ation is allo/e /here one ta5 is i"pose #) the national go6ern"ent an the other #) the local go6ern"ent.
I'. Congress passe a sin ta5 la/ that increase the ta5 rates on cigarettes #) 1+---N. The la/ /as thought to #e su$$icient to ri6e "an) cigarette co"panies out o$ #usiness+ an /as 1uestione in court #) a cigarette co"pan) that /oul go out o$ #usiness #ecause it /oul not #e a#le to pa) the increase ta5.
The cigarette co"pan) is OOOOOP (1 34o) (:) /rong #ecause ta5es are the li$e#loo o$ the go6ern"ent (7) /rong #ecause the la/ recogni;es that the po/er to ta5 is the po/er to estro) (C) correct #ecause no go6ern"ent can epri6e a person o$ his li6elihoo (?) correct #ecause Congress+ in this case+ e5cee e its po/er to ta5
'. .r. :l6are; is in the retail #usiness. He recei6e a e$icienc) ta5 assess"ent $ro" the 7IR containing onl) the co"putation o$ the e$icienc) ta5 an the penalties+ /ithout an) e5planation o$ the $actual an legal #ases $or the assess"ent. Is the assess"ent 6ali D (1 34o) (:) The assess"ent is 6ali @ all that .r. :l6are; has to !no/ is the a"ount o$ the ta5. (7) The assess"ent is in6ali @ the la/ re1uires a state"ent o$ the $acts an the la/ upon /hich the assess"ent is #ase . (C) The assess"ent is 6ali #ut .r. :l6are; can still contest it. (?) The assess"ent is in6ali #ecause .r. :l6are; has no /a) to eter"ine i$ the co"putation is erroneous. P 2
'I. In (-1-+ .r. Llaton sent his sister Helen M1 +--- 6ia a telegraphic trans$er through the 7an! o$ LI. The #an!Fs re"ittance cler! "a e a "ista!e an cre ite Helen /ith M1+---+--- /hich she pro"ptl) /ith re/. The #an! e"an e the return o$ the "ista!enl) cre ite e5cess+ #ut Helen re$use . The 7IR entere the picture an in6estigate Helen. %oul the 7IR #e correct i$ it eter"ines that Helen earne ta5a#le inco"e un er these $actsFD (1 34o) (:) No+ she ha no inco"e #ecause she ha no right to the "ista!enl) cre ite $un s. (7) ,es+ inco"e is inco"e regar less o$the source. (C) No+ it /as not her $ault that the $un s in e5cess o$ M1+--- /ere cre ite to her. (?) No+ the $un s in e5cess o$M1+--- /ere in e$$ect onate to her.
'II. The "unicipalit) o$ San Isi ro passe an or inance i"posing a ta5 on installation "anagers. :t that ti"e+ there /as onl) one installation "anager in the "unicipalit)@ thus+ onl) he /oul #e lia#le $or the ta5. Is the la/ constitutionalD (1 34o) (:) It is unconstitutional #ecause it clearl) iscri"inates against this person. (7) It is unconstitutional $or lac! o$ legal #asis. (C) It is constitutional as it applies to all persons in that class. (?) It is constitutional #ecause the po/er to ta5 is the po/er to estro).
'III. *,K Corporation "anu$actures glass panels an is al"ost at the point o$ insol6enc). It has no "ore cash an all it has are unsol glass panels. It recei6e an assess"ent $ro" the 7IR $or e$icienc) inco"e ta5es. It /ants to pa) #ut ue to lac! o$ cash+ it see!s per"ission to pa) in !in /ith glass panels.
Shoul the 7IR grant the re1ueste per"issionDP (1 34o) (:) It shoul grant per"ission to "a!e pa)"ent con6enient to ta5pa)ers.
(7) It shoul not grant per"ission #ecause a ta5 is generall) a pecuniar) #ur en. (C) It shoul grant per"ission@ other/ise+ *,K Corporation /oul not #e a#le to pa). (?) It shoul not grant per"ission #ecause the go6ern"ent oes not ha6e the storage $acilities $or glass panels. I*. Lrior to the ':T la/+ sales o$ cars /ere su#Cect to a sales ta5 #ut the ta5 applie onl) to the original or the $irst sale@ the secon an su#se1uent sales /ere not su#Cect to ta5. ?eltoi .otors+ Inc. (?eltoi ) hit on the i ea o$ setting up a /holl)8o/ne su#si iar)+ Gon"a .otors+ Inc. (Gon"a )+ an o$ selling its asse"#le cars to Gon"a at a lo/ price so it /oul pa) a lo/er ta5 on the $irst sale. Gon"a /oul then sell the cars to the pu#lic at a higher price /ithout pa)ing an) sales ta5 on this su#se1uent sale. Characteri;e the arrange"ent. (1 34o) :. The plan is a legiti"ate e5ercise o$ ta5 planning an "erel) ta!es a 6antage o$ a loophole in the la/. 7. The plan is legal #ecause the go6ern"ent collects ta5es an)/a). C. The plan is i"proper@ the 6eil o$ corporate $iction can #e pierce so that the secon sale /ill #e consi ere the ta5a#le sale. ?. The go6ern"ent "ust respect Gon"a Fs separate Curi ical personalit) an ?eltoi Fs ta5a#le sale to it. *. LRT Corp. purchase a resi ential house an lot /ith a s/i""ing pool in an upscale su# i6ision an re1uire the c.o"pan) presi ent to sta) there /ithout pa)ing rent@ it reasone out that the co"pan) presi ent "ust "aintain a certain i"age an #e a#le to entertain guests at the house to pro"ote the co"pan)Fs #usiness. The co"pan) presi ent eclare that #ecause the) are chil less+ he an his /i$e coul 6er) /ell li6e in a s"aller house.
%as there a ta5a#le $ringe #ene$itD (1 34o) (:) There /as no ta5a#le $ringe #ene$it since it /as $or the con6enience o$ the e"plo)er an /as necessar) $or its #usiness.
(7) There /as a ta5a#le $ringe #ene$it since the sta) at the house /as $or $ree. (C) There /as a ta5a#le $ringe #ene$it #ecause the house /as 6er) lu5urious. (?) There /as no ta5a#le $ringe #ene$it #ecause the co"pan) presi ent /as onl) re1uire to sta) there an i not e"an $ree housing. 1*I. Ta5pa)er : /as re1uire #) the 7IR to sign an su#"it a /ai6er o$ the statute o$ li"itations on the assess"ent perio + to gi6e the 7IR "ore ti"e to co"plete its in6estigation. The 7IR accepte the /ai6er #ut $aile to in icate the ate o$ its acceptance. %hat is the legal status o$ the /ai6erD (1 34o) (:) The /ai6er is 6ali #ecause the ate o$ acceptance is i""aterial an uni"portant. (7) The /ai6er is in6ali @ the ta5pa)er cannot #e re1uire to /ai6e the statute o$ li"itations. (C) The /ai6er is in6ali @ the ate o$ acceptance is crucial in counting the start o$ the perio o$ suspension o$ the prescripti6e perio . (?) The /ai6er is 6ali + ha6ing #een accepte #) the 7IR.
*II. Ta5pa)er :n ) recei6e on Qanuar) 3+ (-1- a preli"inar) assess"ent notice (L:N) $ro" the 7IR+ stating that he ha $i$teen (1A) a)s $ro" its receipt to co""ent or to $ile a protest. Eight (2) a)s later (or on Qanuar) 11+ (-1 - )+ #e$ore he coul co""ent or $ile a protest+ :n ) recei6e the $inal assess"ent notice (I:N). ?eci e on the 6ali it) o$ the I:N. (1 34o) (:) The I:N is in6ali @ :n ) /as not gi6en the chance to respon to the L:N+ in 6iolation o$ his ue process rights. (7) The I:N is in6ali $or #eing pre"ature. (C) The I:N is 6ali since it /as issue #e$ore the right to assess prescri#e . (?) The I:N is 6ali . There is no legal re1uire"ent that the I:N shoul a/ait the protest to the L:N #ecause protest to the L:N is not "an ator).
*III. .SI Corp. i"ports orange an le"on concentrates as ra/ "aterials $or the $ruit rin!s it sells locall). The 7ureau o$ Custo"s (7OC) i"pose a 1o4o ut) rate on the concentrates. Su#se1uentl)+ the 7OC change its position an hel that the concentrates shoul #e ta5e at Ho4o ut) rate. .SI isagree /ith the ruling an 1uestione it in the CT: /hich uphel .SIFs position. The Co""issioner o$ Custo"s appeale to the CT: en #ane /ithout $iling a "otion $or reconsi eration. Resol6e the appeal. (1 34o) (:) The appeal shoul #e is"isse #ecause a "otion $or reconsi eration is "an ator). 11 (7) The appeal shoul #e is"isse $or ha6ing #een $ile out o$ ti"e. (C) The appeal shoul #e gi6en ue course since a "otion $or reconsi eration is a useless e5ercise. (?) The appeal shoul #e uphel to #e $air to the go6ern"ent /hich nee s ta5es.
*I'. The spouses Qun an El6ira San o6al purchase a piece o$ lan $or LA+---+--an inclu e their t/o (() "inor chil ren as co8purchasers in the ?ee o$ :#solute Sale. The Co""issioner o$ Internal Re6enue ( CIR) rule that there /as an i"plie onation an assesse onorsF ta5es against the spouses.
Rule on the CIRFs action. (I -4o) (:) The CIR is /rong@ a onation "ust #e e5press. (7) The CIR is /rong@ $inancial capacit) is not a re1uire"ent $or a 6ali sale. (C) The CIR is correct@ the a"ount in6ol6e is huge an ulti"atel) en s up /ith the chil ren. (?) The CIR is correct@ there /as ani"us onan i since the chil ren ha no $inancial capacit) to #e co8purchasers.
*'. Lheleco is a po/er generation an istri#ution co"pan) operating "ainl) $ro" the Cit) o$ Taguig. It o/ns electric poles /hich it also rents out to other co"panies that use poles such as telephone an ca#le co"panies. Taguig passe an or inance i"posing a $ee e1ui6alent to 1N o$ the annual rental $or these poles. Lheleco 1uestione Fthe legalit) o$ the or inance on the groun that it i"poses an inco"e ta5 /hich local go6ern"ent units (&G Us) are prohi#ite $ro" i"posing. Rule on the 6ali it) o$ the or inance. (1 o4o) (:) The or inance is 6oi @ the $ee is #ase on rental inco"e an is there$ore a ta5 on inco"e. (7) The or inance is 6ali as a legiti"ate e5ercise o$ police po/er to regulate electric poles. (C) The or inance is 6oi @ 1N o$ annual rental is e5cessi6e an oppressi6e. (?) The or inance is 6ali @ an &GU "a) i"pose a ta5 on inco"e.
*'I. :leta sue 7o#o) $or #reach o$ pro"ise to "arr). 7o#o) lost the case an ul) pai the courtFs a/ar that inclu e + a"ong others+ LlOO+OOO as "oral a"ages $or the "ental anguish :leta su$$ere . 1(
?i :leta earn a ta5a#le inco"eD (1 o4o) (:) She ha a ta5a#le inco"e o$ LIOO+OOO since inco"e is inco"e $ro" /hate6er source. (7) She ha no ta5a#le inco"e #ecause it /as a onation. (C) She ha ta5a#le inco"e since she "a e a pro$it. (?) She ha no ta5a#le inco"e since "oral a"ages are co"pensator).
*'II. .r. .a)uga onate his resi ential house an lot to his son an ul) pai the onorFs ta5. In the ?ee o$ ?onation) .r. .a)uga e5pressl) reser6e $or hi"sel$ the usu$ruct o6er the propert) $or as long as he li6e .
?escri#e the (1 34o)
onate
propert) $ro" the ta5ation perspecti6e.
(:) The propert) /ill $or" part o$ .r. I61a)ugaFs gross estate /hen he ies. (7) The propert) /ill not $o"1 part o$ .r. .a)ugaFs gross estate /hen he ies #ecause he pai the onorFs ta5. (C) The propert) /ill $or" part o$ .r. .a)ugaFs gross estate #ecause he ie soon a$ter the onation. (?) The propert) /ill not $"" part o$ .r. .a)ugaFs gross estate #ecause it is no longer his.
*'III. .r. K "a e an i"portation /hich he eclare at the 7ureau o$ Custo"s (7OC) as <Use Truc! Replace"ent Larts<. Upon in6estigation+ the container 6ans containe 1A units o$ Lorsche an Ierrari cars. Characteri;e .r. KFs action. (1 34o) (:) .r. K co""itte s"uggling. (7) .r. K i not co""it s"uggling #ecaus9 he su#"itte his ship"ent to 7OC e5a"ination. (C) .r. K onl) "a e a "is eclaration+ #ut i not co""it s"uggling. (?) .r. K i not co""it s"uggling #ecause the ship"ent has not le$t the custo"s area.
*I*. .r. : /as preparing his inco"e ta5 return an ha so"e ou#t on /hether a co""ission he earne shoul #e eclare $or the current )ear or $or the succee ing )ear. He sought the opinion o$ his la/)er /ho a 6ise hi" to report the co""ission in the succee ing )ear. He hee e his 13 la/)erFs a 6ice an reporte the co""ission in the succee ing )ear. The la/)erFs a 6ice turne out to #e /rong@ in .r. :Fs petition against the 7IR assess"ent+ the court rule against .r. :.
Is .r. : guilt) o$ $rau D (1 34o) (:) .r. : is not guilt) o$ $rau as he si"pl) $ollo/e the a 6ice o$ his la'6)er. (7) .r. : is guilt) o$ $rau @ he eli#eratel) i not report the co""ission in the current )ear /hen he shoul ha6e one so. (C) .r. :Fs la/)er shoul pa) the ta5 $or gi6ing the /rong a 6ice. (?) .r. : is guilt) $or $ailing to consult his accountant.
**. The 7IR+ through the Co""issioner+ institute a s)ste" re1uiring ta5pa)ers to su#"it to the 7IR a su""ar) list o$ their sales an purchases uring the )ear+ in icating the na"e o$ the seller or the #u)er an the a"ount. 7ase on these lists+ the 7IR isco6ere that in (--0 :7C Corp. purchase $ro" *,K Corp. goo s /orth LS+OOO+OOO. *,K Corp. i not eclare these $or inco"e ta5 purposes as its reporte gross sales $or (--0 /as onl) Ll+OOO+OOO.
%hich o$ the $ollo/ing e$enses "a) *,K Corp. interpose in an assess"ent against it #) the 7IRD (1 34o) (:) The 7IR has no authorit) to o#tain thir part) in$or"ation to assess ta5pa)ers. (7) The thir part) in$or"ation is ina "issi#le as hearsa) e6i ence. (C) The s)ste" o$ re1uiring ta5pa)ers to su#"it thir part) in$or"ation is illegal $or 6iolating the right to pri6ac). (?) None o$ the a#o6e. NOTHING IO&&O%S
There are T%E&'E (1() Essa) Questions nu"#ere I to *II+ an T%ENT, ((-) .ultiple Choice Questions (.CQs) nu"#ere I to **+ to #e ans/ere /ithin $our (0) hours. The essa) portion contains 1uestions that are /orth 2-34o o$ the /hole e5a"ination+ /hile the .CQ portion contains 1uestions /orth (-34o.
(. Rea each 1uestion 6er) care$ull) an /rite )our ans/ers in )our 7ar E5a"ination Note#oo! in the sa"e or er the 1uestions are pose . %rite )our ans/ers onl) at the $ront+ not the #ac!+ page o$ e6er) sheet in )our Note#oo!. Note /ell the allocate percentage points $or each nu"#er+ 1uestion+ or su#8 1uestion. In )our ans/ers+ 9se the nu"#ering s)ste" in the 1uestionnaire. I$ the sheets pro6i e in )our E5a"ination Note#oo! are not su$$icient $or )our ans/ers+ use the #ac! pages o$ e6er) sheet o$ )our E5a"ination Note#oo!+ starting at the #ac! page o$ the $irst sheet an the #ac! o$ the succee ing sheets therea$ter.
3. :ns/er the Essa) 1uestions legi#l)+ clearl)+ an concisel). Start each nu"#er on a separate page. :n ans/er to a su#81uestion un er the sa"e nu"#er "a) #e /ritten continuousl) on the sa"e page an the i""e iatel) succee ing pages until co"plete . ,our ans/er shoul e"onstrate )our a#ilit) to anal);e the $acts presente #) the 1uestion+ to select the "aterial $ro" the i""aterial $acts+ an to iscern the points upon /hich the 1uestion turns. It shoul sho/ )our !no/le ge an un erstan ing o$ the pertinent principles an (
theories o$ la/ in6ol6e an their 1uali$ications an li"itations. It shoul e"onstrate )our a#ilit) to appl) the la/ to the gi6en $acts+ an to reason logicall) in a la/)er8li!e "anner to a soun conclusion $ro" the gi6en pre"ises. : "ere <,es< or <No< ans/er /ithout an) correspon ing e5planation or iscussion /ill not #e gi6en an) cre it. Thus+ al/a)s hrie=l6 #ut $ull) e5plain )our ans/ers althou>h the guestion oes not e5pressl) as! $or an e5planation. :t the sa"e ti"e+ re"e"#er that a co"plete e5planation oes not re1uire that )ou 6olunteer in$or"ation or iscuss legal octrines that are not necessar) or pertinent to the solution to the pro#le". ,ou o not nee to re8/rite or repeat the 1uestion in )our Note#oo!.
0. .CQs are to #e ans/ere #) /riting in )our Note#oo! the capital letter (:+ 7+ C+ ?+ or E) correspon ing to )our chosen ans/er. The .CQ ans/ers shoul #egin in the page $ollo/ing the last page o$ )our essa) ans/ers.
There is onl) one correct ans/er to e6er) .CQ@ choose the 7EST ans/er $ro" a"on( the o$$ere choices. Note that .so"e .CQs "a) nee care$ul anal)sis #oth o$ the 1uestions an the choices o$$ere .
A. .a!e sure )ou o not /rite )our na"e or an) e5traneous notels or istincti6e "ar!ingls on )our Note#oo! that can ser6e as i enti$)ing "ar!4s (such as na"es that are not in the gi6en 1uestions+ pra)ers+ or pri6ate notes to the E5a"iner).
%riting+ lea6ing or "a!ing an) istinguishing or i enti$)ing "ar! in the e5a" Note#oo! is consi ere cheating an can is1uali$) )ou $or the 7ar e5a"inations. ,ou can use the 1uestionnaire $or notes )ou "a) /ish4nee to /rite uring the e5a"ination.
H:N? IN ,OUR NOTE7OOB %ITH THIS QUESTIONN:IRE Q$%7i9
Chair"an (-13 7ar E5a"inations 3 ESS:, QUESTIONS
I. In its $inal a Cust"ent return $or the (-1- ta5a#le )ear+ :7C Corp. ha e5cess ta5 cre its arising $ro" its o6er8/ithhol ing o$ inco"e pa)"ents. It opte to carr) o6er the e5cess ta5 cre its to the $ollo/ing )ear. Su#se1uentl)+ :7C Corp. change its "in an applie $or a re$un o$ the e5cess ta5 cre its.
%ill the clai" $or re$un prosperD (Eo4o)
II. : group o$ philanthropists organi;e a non8stoc!+ non8pro$it hospital $or charita#le purposes to pro6i e "e ical ser6ices to the poor. The hospital also accepte pa)ing patients although none o$ its inco"e accrue to an) pri6ate in i6i ual@ all inco"e /ere plo/e #ac! $or the hospitalFs use an not "ore than 3-o4o o$ its $un s /ere use $or a "inistrati6e purposes. Is the hospital su#Cect to ta5 on its inco"eD I$ it is+ at /hat rateD (E34o)
III. :7C Corporation is registere as a hol ing co"pan) an has an o$$ice in the Cit) o$.a!ati. It has no actual #usiness operations. It in6este in another co"pan) an its earnings are li"ite to i6i en s $ro" this in6est"ent+ interests on its #an! eposits+ an $oreign e5change gains $ro" its $oreign currenc) account. The Cit) o$ .a!ati assesse :7C Corporation as a contractor or one that sells ser6ices $or a $ee. Is the Cit) o$.a!ati correctD (E34o)
I'. :tt). Ga"#ino is a partner in a general pro$essional partnership. The partnership co"putes its gross re6enues+ clai"s e uctions allo/e un er the Ta5 Co e+ an istri#utes the net inco"e to the partners+ inclu ing :tt). Ga"#ino+ in accor ance /ith its articles o$ partnership. In $iling his o/n inco"e ta5 return+ :tt). Ga"#ino clai"e e uctions that the partnership i not clai"+ such as purchase o$ la/ #oo!s+ 0 entertain"ent e5penses+ car "surance an car epreciation. The 7IR isallo/e the e uctions. %as the 7IR correctD (E34o)
'. .r. :gustin+ HA )ears ol an su$$ering $ro" an incura#le isease+ eci e to sell $or 6alua#le an su$$icient consi eration a house an lot to his son. He ie one )ear later. In the settle"ent o$ .r. :gustinFs estate+ the 7IR argue that the house an lot /ere trans$erre in conte"plation o$ eath an shoul there$ore $or" part o$ the gross estate $or estate ta5 purposes. Is the 7IR correctD (Ho4o)
'I. On Octo#er 1A+ (--A+ :7C Corp. i"porte 1+--- !ilos o$ steel ingots an pai custo"s uties an ':T to the 7ureau o$ Custo"s on the i"portation. On Ie#ruar) 1H+ (--J+ the 7ureau o$ Custo"s+ citing pro6isions o$ the Tari$$ an Custo"s Co e on post8au it+ in6estigate an assesse :7C Corp. $or e$icienc) custo"s uties an ':T. Is the 7ureau o$ Custo"s correctD (H34o)
'II. *,K &a/ O$$ices+ a la/ partnership in the Lhilippines an a ':T8registere ta5pa)er+ recei6e a 1uer) #) e8"ail $ro" Gains#urg Corporation+ a corporation organi;e un er the la/s o$ ?ela/are+ #ut the e8"ail ca"e $ro" Cali$ornia /here Gains#urg has an o$$ice. Gains#urg has no o$$ice in the Lhilippines an oes no #usiness in the Lhilippines. *,K &a/ O$$ices ren ere its opinion on the 1uer) an #ille Gains#urg USM1+--- $or the opinion. Gains#urg re"itte its pa)"ent through Citi#an! /hich con6erte the re"itte USM1 +--- to pesos an eposite the con6erte a"ount in the *,K &a/ O$$ices account. %hat are the ta5 i"plications o$ the pa)"ent to *,K &a/ O$$ices in ter"s o$ ':T an inco"e ta5esD (Ho4o) A 'III. .r. :"a o lease a piece o$ lan o/ne #) the .unicipalit) o$ Linagsa#itan an #uilt a /arehouse on the propert) $or his #usiness operations. The .unicipal :ssessor assesse .r. :"a o $or real propert) ta5es on the lan an the /arehouse. .r. :"a o o#Cecte to the assess"ent+ conten ing that he shoul not #e as!e to pa) realt) ta5es on the lan since it is "unicipal propert).
%as the assess"ent properD (Ao4o)
I*. In the settle"ent o$ the estate o$ .r. 7ar#era /ho ie intestate+ his /i$e renounce her inheritance an her share o$ the conCugal propert) in $a6or o$ their chil ren. The 7IR eter"ine that there /as a ta5a#le gi$t an thus assesse .rs. 7ar#era as a onor. %as the 7IR correctD (H34o)
*.
In (-1-+ pursuant to a &etter o$ :uthorit) (&:) issue #) the Regional ?irector+ .r. :#ce e /as assesse e$icienc) inco"e ta5es #) the 7IR $or the )ear (--J. He pai the e$icienc). In (-11+ .r. :#ce e recei6e another &: $or the sa"e )ear (--J+ this ti"e $ro" the National In6estigation ?i6ision+ on the groun that .r. :#ce eFs (--J return /as $rau ulent. .r. :#ce e conteste the &: on the groun that he can onl) #e in6estigate once in a ta5a#le )ear. ?eci e. (Ho4o)
*I. In (---+ .r. 7elen #ought a resi ential house an lot $or LI +---+---. He use the propert) as his an his $a"il)Fs principal resi ence. It is no/ )ear (-13 an he is thin!ing o$ selling the propert) to #u) a ne/ one. He see!s )our a 6ice on ho/ "uch inco"e ta5 he /oul pa) i$ he sells the propert). The total ;onal 6alue o$ the propert) is LA+---+--- an the $air "ar!et 6alue per the ta5 eclaration is L(+A--+---. He inten s to sell it $or LE+---+---.
%hat "aterial consi erations /ill )ou ta!e into account in co"puting the inco"e ta5D Llease e5plain the legal rele6ance o$ each o$ these consi erations. (H34o) E
*II. ,ou are the retaine ta5 counsel o$ :7C Corp. ,our client in$or"e )ou that the) ha6e #een irectl) approache /ith a proposal #) a 7IR insi er (i.e.+ a "i le ran! 7IR o$$icial) on the ta5 "atter the) ha6e re$erre to )ou $or han ling. The 7IR insi erFs proposal is to settle the "atter #) signi$icantl) re ucing the assess"ent+ #ut he /ill get A-N o$ the sa6ings arising $ro" the re uce assess"ent. %hat ta5+ cri"inal an ethical consi erations /ill )ou ta!e into account in gi6ing )our a 6iceD E5plain the rele6ance o$ each o$ these consi erations. (JN)
.U&TIL&E CHOICE QUESTIONS
I. :7C Corp. /as issol6e an li1ui ating i6i en s /ere eclare an pai to the stoc!hol ers. %hat ta5 conse1uence $ollo/sD (1 34o) (:) :7C Corp. shoul e uct a $inal ta5 o$ 1-N $ro" the i6i en s. eclare their gain $ro" their in6est"ent an pa) inco"e ta5
(7) The stoc!hol ers shoul at the or inar) rates.
(C) The i6i en s are e5e"pt $ro" ta5. (?) :7C Corp. shoul /ithhol a 1-N cre ita#le ta5.
II. .GC Corp. secure an inco"e ta5 holi a) $or A )ears as a pioneer in ustr). On the $ourth )ear o$ the ta5 holi a)+ .GC Corp. eclare an pai cash i6i en s to its stoc!hol ers+ all o$ /ho" are in i6i uals. :re the i6i en s ta5a#leD (1 34o) (:) The i6i en s are ta5a#le@ the ta5 e5e"ption o$ .GC Corp. oes not e5ten to its stoc!hol ers. (7) The i6i en s are ta5 e5e"pt #ecause o$ .GC Corp.Fs inco"e ta5 holi a). (C) The i6i en s are ta5a#le i$ the) e5cee A-N o$ .GC Corp.Fs retaine earnings. (?) The i6i en s are e5e"pt i$ pai #e$ore the en o$ .GC Corp.Fs $iscal )ear. H III. .r. :las sells shoes in .a!ati through a retail store. He pa)s the ':T on his gross sales to the 7IR an the "unicipal license ta5 #ase on the sa"e gross sales to the Cit) o$ .a!ati. He co"es to )ou $or a 6ice #ecause he thin!s he is #eing su#Cecte to ou#le ta5ation. %hat a 6ice /ill )ou gi6e hi"D (1 34o) (:) ,es+ there is ou#le ta5ation an it is oppressi6e. (7) The Cit) o$.a!ati oes not ha6e this po/er. (C) ,es+ there is ou#le ta5ation an this is illegal " the Lhilippines.
(?) ?ou#le ta5ation is allo/e /here one ta5 is i"pose #) the national go6ern"ent an the other #) the local go6ern"ent.
I'. Congress passe a sin ta5 la/ that increase the ta5 rates on cigarettes #) 1+---N. The la/ /as thought to #e su$$icient to ri6e "an) cigarette co"panies out o$ #usiness+ an /as 1uestione in court #) a cigarette co"pan) that /oul go out o$ #usiness #ecause it /oul not #e a#le to pa) the increase ta5.
The cigarette co"pan) is OOOOOP (1 34o) (:) /rong #ecause ta5es are the li$e#loo o$ the go6ern"ent (7) /rong #ecause the la/ recogni;es that the po/er to ta5 is the po/er to estro) (C) correct #ecause no go6ern"ent can epri6e a person o$ his li6elihoo (?) correct #ecause Congress+ in this case+ e5cee e its po/er to ta5
'. .r. :l6are; is in the retail #usiness. He recei6e a e$icienc) ta5 assess"ent $ro" the 7IR containing onl) the co"putation o$ the e$icienc) ta5 an the penalties+ /ithout an) e5planation o$ the $actual an legal #ases $or the assess"ent. Is the assess"ent 6ali D (1 34o) (:) The assess"ent is 6ali @ all that .r. :l6are; has to !no/ is the a"ount o$ the ta5. (7) The assess"ent is in6ali @ the la/ re1uires a state"ent o$ the $acts an the la/ upon /hich the assess"ent is #ase . (C) The assess"ent is 6ali #ut .r. :l6are; can still contest it. (?) The assess"ent is in6ali #ecause .r. :l6are; has no /a) to eter"ine i$ the co"putation is erroneous. P 2
'I. In (-1-+ .r. Llaton sent his sister Helen M1 +--- 6ia a telegraphic trans$er through the 7an! o$ LI. The #an!Fs re"ittance cler! "a e a "ista!e an cre ite Helen /ith M1+---+--- /hich she pro"ptl) /ith re/. The #an! e"an e the return o$ the "ista!enl) cre ite e5cess+ #ut Helen re$use . The 7IR entere the picture an in6estigate Helen. %oul the 7IR #e correct i$ it eter"ines that Helen earne ta5a#le inco"e un er these $actsFD (1 34o) (:) No+ she ha no inco"e #ecause she ha no right to the "ista!enl) cre ite $un s. (7) ,es+ inco"e is inco"e regar less o$the source. (C) No+ it /as not her $ault that the $un s in e5cess o$ M1+--- /ere cre ite to her. (?) No+ the $un s in e5cess o$M1+--- /ere in e$$ect onate to her.
'II. The "unicipalit) o$ San Isi ro passe an or inance i"posing a ta5 on installation "anagers. :t that ti"e+ there /as onl) one installation "anager in the "unicipalit)@ thus+ onl) he /oul #e lia#le $or the ta5. Is the la/ constitutionalD (1 34o) (:) It is unconstitutional #ecause it clearl) iscri"inates against this person. (7) It is unconstitutional $or lac! o$ legal #asis. (C) It is constitutional as it applies to all persons in that class. (?) It is constitutional #ecause the po/er to ta5 is the po/er to estro).
'III. *,K Corporation "anu$actures glass panels an is al"ost at the point o$ insol6enc). It has no "ore cash an all it has are unsol glass panels. It recei6e an assess"ent $ro" the 7IR $or e$icienc) inco"e ta5es. It /ants to pa) #ut ue to lac! o$ cash+ it see!s per"ission to pa) in !in /ith glass panels.
Shoul the 7IR grant the re1ueste per"issionDP (1 34o) (:) It shoul grant per"ission to "a!e pa)"ent con6enient to ta5pa)ers.
(7) It shoul not grant per"ission #ecause a ta5 is generall) a pecuniar) #ur en. (C) It shoul grant per"ission@ other/ise+ *,K Corporation /oul not #e a#le to pa). (?) It shoul not grant per"ission #ecause the go6ern"ent oes not ha6e the storage $acilities $or glass panels. I*. Lrior to the ':T la/+ sales o$ cars /ere su#Cect to a sales ta5 #ut the ta5 applie onl) to the original or the $irst sale@ the secon an su#se1uent sales /ere not su#Cect to ta5. ?eltoi .otors+ Inc. (?eltoi ) hit on the i ea o$ setting up a /holl)8o/ne su#si iar)+ Gon"a .otors+ Inc. (Gon"a )+ an o$ selling its asse"#le cars to Gon"a at a lo/ price so it /oul pa) a lo/er ta5 on the $irst sale. Gon"a /oul then sell the cars to the pu#lic at a higher price /ithout pa)ing an) sales ta5 on this su#se1uent sale. Characteri;e the arrange"ent. (1 34o) :. The plan is a legiti"ate e5ercise o$ ta5 planning an "erel) ta!es a 6antage o$ a loophole in the la/. 7. The plan is legal #ecause the go6ern"ent collects ta5es an)/a). C. The plan is i"proper@ the 6eil o$ corporate $iction can #e pierce so that the secon sale /ill #e consi ere the ta5a#le sale. ?. The go6ern"ent "ust respect Gon"a Fs separate Curi ical personalit) an ?eltoi Fs ta5a#le sale to it. *. LRT Corp. purchase a resi ential house an lot /ith a s/i""ing pool in an upscale su# i6ision an re1uire the c.o"pan) presi ent to sta) there /ithout pa)ing rent@ it reasone out that the co"pan) presi ent "ust "aintain a certain i"age an #e a#le to entertain guests at the house to pro"ote the co"pan)Fs #usiness. The co"pan) presi ent eclare that #ecause the) are chil less+ he an his /i$e coul 6er) /ell li6e in a s"aller house.
%as there a ta5a#le $ringe #ene$itD (1 34o) (:) There /as no ta5a#le $ringe #ene$it since it /as $or the con6enience o$ the e"plo)er an /as necessar) $or its #usiness.
(7) There /as a ta5a#le $ringe #ene$it since the sta) at the house /as $or $ree. (C) There /as a ta5a#le $ringe #ene$it #ecause the house /as 6er) lu5urious. (?) There /as no ta5a#le $ringe #ene$it #ecause the co"pan) presi ent /as onl) re1uire to sta) there an i not e"an $ree housing. 1*I. Ta5pa)er : /as re1uire #) the 7IR to sign an su#"it a /ai6er o$ the statute o$ li"itations on the assess"ent perio + to gi6e the 7IR "ore ti"e to co"plete its in6estigation. The 7IR accepte the /ai6er #ut $aile to in icate the ate o$ its acceptance. %hat is the legal status o$ the /ai6erD (1 34o) (:) The /ai6er is 6ali #ecause the ate o$ acceptance is i""aterial an uni"portant. (7) The /ai6er is in6ali @ the ta5pa)er cannot #e re1uire to /ai6e the statute o$ li"itations. (C) The /ai6er is in6ali @ the ate o$ acceptance is crucial in counting the start o$ the perio o$ suspension o$ the prescripti6e perio . (?) The /ai6er is 6ali + ha6ing #een accepte #) the 7IR.
*II. Ta5pa)er :n ) recei6e on Qanuar) 3+ (-1- a preli"inar) assess"ent notice (L:N) $ro" the 7IR+ stating that he ha $i$teen (1A) a)s $ro" its receipt to co""ent or to $ile a protest. Eight (2) a)s later (or on Qanuar) 11+ (-1 - )+ #e$ore he coul co""ent or $ile a protest+ :n ) recei6e the $inal assess"ent notice (I:N). ?eci e on the 6ali it) o$ the I:N. (1 34o) (:) The I:N is in6ali @ :n ) /as not gi6en the chance to respon to the L:N+ in 6iolation o$ his ue process rights. (7) The I:N is in6ali $or #eing pre"ature. (C) The I:N is 6ali since it /as issue #e$ore the right to assess prescri#e . (?) The I:N is 6ali . There is no legal re1uire"ent that the I:N shoul a/ait the protest to the L:N #ecause protest to the L:N is not "an ator).
*III. .SI Corp. i"ports orange an le"on concentrates as ra/ "aterials $or the $ruit rin!s it sells locall). The 7ureau o$ Custo"s (7OC) i"pose a 1o4o ut) rate on the concentrates. Su#se1uentl)+ the 7OC change its position an hel that the concentrates shoul #e ta5e at Ho4o ut) rate. .SI isagree /ith the ruling an 1uestione it in the CT: /hich uphel .SIFs position. The Co""issioner o$ Custo"s appeale to the CT: en #ane /ithout $iling a "otion $or reconsi eration. Resol6e the appeal. (1 34o) (:) The appeal shoul #e is"isse #ecause a "otion $or reconsi eration is "an ator). 11 (7) The appeal shoul #e is"isse $or ha6ing #een $ile out o$ ti"e. (C) The appeal shoul #e gi6en ue course since a "otion $or reconsi eration is a useless e5ercise. (?) The appeal shoul #e uphel to #e $air to the go6ern"ent /hich nee s ta5es.
*I'. The spouses Qun an El6ira San o6al purchase a piece o$ lan $or LA+---+--an inclu e their t/o (() "inor chil ren as co8purchasers in the ?ee o$ :#solute Sale. The Co""issioner o$ Internal Re6enue ( CIR) rule that there /as an i"plie onation an assesse onorsF ta5es against the spouses.
Rule on the CIRFs action. (I -4o) (:) The CIR is /rong@ a onation "ust #e e5press. (7) The CIR is /rong@ $inancial capacit) is not a re1uire"ent $or a 6ali sale. (C) The CIR is correct@ the a"ount in6ol6e is huge an ulti"atel) en s up /ith the chil ren. (?) The CIR is correct@ there /as ani"us onan i since the chil ren ha no $inancial capacit) to #e co8purchasers.
*'. Lheleco is a po/er generation an istri#ution co"pan) operating "ainl) $ro" the Cit) o$ Taguig. It o/ns electric poles /hich it also rents out to other co"panies that use poles such as telephone an ca#le co"panies. Taguig passe an or inance i"posing a $ee e1ui6alent to 1N o$ the annual rental $or these poles. Lheleco 1uestione Fthe legalit) o$ the or inance on the groun that it i"poses an inco"e ta5 /hich local go6ern"ent units (&G Us) are prohi#ite $ro" i"posing. Rule on the 6ali it) o$ the or inance. (1 o4o) (:) The or inance is 6oi @ the $ee is #ase on rental inco"e an is there$ore a ta5 on inco"e. (7) The or inance is 6ali as a legiti"ate e5ercise o$ police po/er to regulate electric poles. (C) The or inance is 6oi @ 1N o$ annual rental is e5cessi6e an oppressi6e. (?) The or inance is 6ali @ an &GU "a) i"pose a ta5 on inco"e.
*'I. :leta sue 7o#o) $or #reach o$ pro"ise to "arr). 7o#o) lost the case an ul) pai the courtFs a/ar that inclu e + a"ong others+ LlOO+OOO as "oral a"ages $or the "ental anguish :leta su$$ere . 1(
?i :leta earn a ta5a#le inco"eD (1 o4o) (:) She ha a ta5a#le inco"e o$ LIOO+OOO since inco"e is inco"e $ro" /hate6er source. (7) She ha no ta5a#le inco"e #ecause it /as a onation. (C) She ha ta5a#le inco"e since she "a e a pro$it. (?) She ha no ta5a#le inco"e since "oral a"ages are co"pensator).
*'II. .r. .a)uga onate his resi ential house an lot to his son an ul) pai the onorFs ta5. In the ?ee o$ ?onation) .r. .a)uga e5pressl) reser6e $or hi"sel$ the usu$ruct o6er the propert) $or as long as he li6e .
?escri#e the (1 34o)
onate
propert) $ro" the ta5ation perspecti6e.
(:) The propert) /ill $or" part o$ .r. I61a)ugaFs gross estate /hen he ies. (7) The propert) /ill not $o"1 part o$ .r. .a)ugaFs gross estate /hen he ies #ecause he pai the onorFs ta5. (C) The propert) /ill $or" part o$ .r. .a)ugaFs gross estate #ecause he ie soon a$ter the onation. (?) The propert) /ill not $"" part o$ .r. .a)ugaFs gross estate #ecause it is no longer his.
*'III. .r. K "a e an i"portation /hich he eclare at the 7ureau o$ Custo"s (7OC) as <Use Truc! Replace"ent Larts<. Upon in6estigation+ the container 6ans containe 1A units o$ Lorsche an Ierrari cars. Characteri;e .r. KFs action. (1 34o) (:) .r. K co""itte s"uggling. (7) .r. K i not co""it s"uggling #ecaus9 he su#"itte his ship"ent to 7OC e5a"ination. (C) .r. K onl) "a e a "is eclaration+ #ut i not co""it s"uggling. (?) .r. K i not co""it s"uggling #ecause the ship"ent has not le$t the custo"s area.
*I*. .r. : /as preparing his inco"e ta5 return an ha so"e ou#t on /hether a co""ission he earne shoul #e eclare $or the current )ear or $or the succee ing )ear. He sought the opinion o$ his la/)er /ho a 6ise hi" to report the co""ission in the succee ing )ear. He hee e his 13 la/)erFs a 6ice an reporte the co""ission in the succee ing )ear. The la/)erFs a 6ice turne out to #e /rong@ in .r. :Fs petition against the 7IR assess"ent+ the court rule against .r. :.
Is .r. : guilt) o$ $rau D (1 34o) (:) .r. : is not guilt) o$ $rau as he si"pl) $ollo/e the a 6ice o$ his la'6)er. (7) .r. : is guilt) o$ $rau @ he eli#eratel) i not report the co""ission in the current )ear /hen he shoul ha6e one so. (C) .r. :Fs la/)er shoul pa) the ta5 $or gi6ing the /rong a 6ice. (?) .r. : is guilt) $or $ailing to consult his accountant.
**. The 7IR+ through the Co""issioner+ institute a s)ste" re1uiring ta5pa)ers to su#"it to the 7IR a su""ar) list o$ their sales an purchases uring the )ear+ in icating the na"e o$ the seller or the #u)er an the a"ount. 7ase on these lists+ the 7IR isco6ere that in (--0 :7C Corp. purchase $ro" *,K Corp. goo s /orth LS+OOO+OOO. *,K Corp. i not eclare these $or inco"e ta5 purposes as its reporte gross sales $or (--0 /as onl) Ll+OOO+OOO.
%hich o$ the $ollo/ing e$enses "a) *,K Corp. interpose in an assess"ent against it #) the 7IRD (1 34o) (:) The 7IR has no authorit) to o#tain thir part) in$or"ation to assess ta5pa)ers. (7) The thir part) in$or"ation is ina "issi#le as hearsa) e6i ence. (C) The s)ste" o$ re1uiring ta5pa)ers to su#"it thir part) in$or"ation is illegal $or 6iolating the right to pri6ac). (?) None o$ the a#o6e. NOTHING IO&&O%S
