1994-2006 Bar Exam Question in Taxation

8/12/2019 1994-2006 Bar Exam Question in Taxation

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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected]

ANSWERS TO BAR

EXAMINATION QUESTIONSIN

1 of 73

TAXATION LAW

* ARRANGED BY TOPIC *

(1994 - 2006)

Ed!"d #$d A%%#$&"d 'ROMUALDO L. SEERIS II

Silliman University - College of Law

From the ANSWERS TO BAR EXAMINATION QUESTIONSby the UP LAW COMPLEX

&

PHILIPPINE ASSOCIATION OF LAW SCHOOLS

June 3, 2007


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FOREWARD

2 of 73

This work is NOT intended FOR SALE or COMMERCE. This work is a freeware. It may

be freely o!ied and distrib"ted# ne$ertheless# %ERMISSION TO CO%& from the editors

is A'(ISA)LE to !rotet the interest of the ORI*INAL SO+RCES,REFERENCES of

this material-. It is !rimarily intended for all those who desire to ha$e a dee!er

"nderstandin of the iss"es ommonly to"hed by the %hili!!ine )ar E/aminations and

its trend on s!eifially on Ta/ation Laws. It is s!eifially intended for law st"dents from

the !ro$ines who# $ery often# are rei!ients of deliberately distorted notes from other

"nsr"!"lo"s law shools and st"dents.

I wo"ld like to seek the ind"lene of the reader for some )ar 0"estions whih are

im!ro!erly lassified "nder a to!i and for some to!is whih are im!ro!erly or

inorantly !hrased# for the arraner is 1"st a )ar Re$iewee who has !re!ared this work

while re$iewin for the 2ndtime for the )ar E/ams 2334 "nder time onstraints and

within his limited knowlede of the law. I wo"ld like to seek the reader5s ind"lene also

for a n"mber of ty!ora!hial errors in this work.

The Arranger


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Detailed Table of Contents

of 73

GENERA+ PRINCIP+ES,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 8B#. /"#!%" P%""$! I$." T#3 S!" (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 8B#. S!#&" % A".! 5 T#3#!$ (2006),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 8C".!$ 5 T#3" A!7%!8 O%d$#% C%! (2001),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 8

C".!$ 5 T#3" P%".%!$ (2001),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 8D%".! T#3 , I$d%".! T#3 (1994),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 8D%".! T#3 , I$d%".! T#3 (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 8D%".! T#3 , I$d%".! T#3 (2001),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 8D%".! T#3 , I$d%".! T#3 (2006),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, D'" T#3#!$ (199:),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, D'" T#3#!$ W7#! C$!!!" DT; (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, D'" T#3#!$8 I$d%".! D.#!" T#3#!$ (199:),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, D'" T#3#!$8 +."$" /"" , +.# T#3 (2004),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, D'" T#3#!$8 M"!7d 5 Ad$& DT (199:),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, I%".%!'! 5 T#3 +#


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 4 of 73E55".!8 C$d$#!$ 5 +#$ $ T#3#!$ (199?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, !8/%$&" B"$"5! T#3 C"%"d E"" (2001),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, !8/%$&" B"$"5! T#3 E"% %"=%"d ! P# (200),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, !I$!"%"! D"5."$. I$!"%"! d"5$" (199? B#%),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, !I$!"%"! D"$="$. I$!"%"! d"5$" (199?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, !ITR P"%$# I$."8 E3"!"d ! /" ITR (199:),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, !ITR8 D"!. C%%#!" T#3#!$ (199:),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, !ITR8 D"!. C%%#!" T#3#!$ (2001),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, #"ITR8 P"%$# I$." T


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] ? of 73E3"!$ C7#%!#'" I$!!!$ (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 3#E3"!$ C7#%!#'" I$!!!$8 C7%.7" (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 3#E3"!$ Ed.#!$# $!!!$ (2004),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 3#E3"!$ G5! @ D$#!$ (1994),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 3#E3"!$ "#d 5 !7" /# (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 33E3"!$ N$-P%5! Ed.#!$# I$!!!$ (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 33E3"!$ N$-P%5! E$!!8 A$.#% A.!! @ I$.d"$!# O"%#!$ (1994),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 33E3"!$ N$-S!.J N$-P%5! A.#!$ (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 3$E3"!$ P%" 5 P"#." P!"% C$!"! (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 3$E3"!$ P%" @ AS TAXES,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $!D$%> T#3 E".!$ C$!%'!$ (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,,,,,,,,, $!D$%> T#38 B# 5% D"!"%$$& G#$ (199?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $!D$%> T#38 D#.$ "$ P#&8 E55".! T#3#!$ (199:),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $#D$%> T#38 D$#!$ ! # S'$& (2001),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $#D$%> T#38 D$#!$ ! N$-S!.F N$-P%5! P%#!" Ed.#!$# I$!!!$ (2000),,,,,,,,,,,,,,,,,,,,,, $#D$%> T#38 D$#!$ ! P!.# C#$dd#!" (200),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $3D$%> T#38 D$"" % B"$"5.#%8 S!%#$&"% (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $3D$%> T#38 S#" 5 7#%" 5 S!. @ S#" 5 R"# P%"%! (1999),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $3E!#!" T#3 C%"7"$" A&%#%#$ R"5% +#< (1994),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $3E!#!" T#3 D$#!$ M%! C## (2001),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $3E!#!" T#3 D$#!$ M%! C## , I$!"% H (1994),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $$E!#!" T#3 G% E!#!" A


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 6 of 73HAT B# 5 HAT (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $%HAT C7#%#.!"%!. 5 HAT (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $%HAT E3"!"d T%#$#.!$ (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $%HAT +#'" 5% P#"$! (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $&HAT T%#$#.!$ D"""d S#"K (199:),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $&HAT8 C"%"d T%#$#.!$ (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $&HAT8 E3"!$ C$!!!$#! (2004),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,,,,,,,, $&HAT8 N$-HAT !#3#"%8 C# 5% R"5$d (2006),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, , $7

REMEDIES IN INTERNA+ REHENUE TAXES,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $7BIR A""$! U$%"&!"%"d P#%!$"%7 (199:),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,,,,, $7BIR C".!$ 5 T#3 D"5."$. (1999),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, , $7BIR C%"8 C$d!$ (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $8BIR C%"8 E3!"$! 5 A!7%! (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $8BIR C%"8 W!77d$& A&"$! (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $8BIR C%%#!$ D!%#$! @ +" (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $8BIR C%! 5 T#3 A"# C".!$ 5 T#3"8 G%$d 5% C%" (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $BIR C%$# P%".!$ T#3 E#$ (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $BIR E3!$.!$8 C%$# +#'! 5 !7" T#3#"% (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, $BIR /%#d"$! R"!%$8 P%# /#." Ed"$." (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %"BIR /%#d"$! R"!%$8 P%# /#." Ed"$." (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %"

BIR G#%$7"$! B#$ A..$! 5 # T#3#"% (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %"BIR P%"-A""$! N!." $! N"."#% (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,, %!BIR P%".%!" P"%d C A.!$ (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %!BIR P%".%!" P"%d8 A""$! @ C".!$ (1999),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %!BIR P%".%!" P"%d8 C%$# A.!$ (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %!BIR S".%". 5 B#$ D"! +#< (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %#BIR S#% R""d E!#!" T#3 D"5."$." (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %#BIR U$#d T#3" , C# 5% U$#d W#&" (199?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,,,,,,, %3BIR8 A""$!8 C%$# C#$! (200?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %3BIR8 A!7%!8 R"5$d % C%"d! 5 T#3" (200?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %3BIR8 C%" (2004),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %3BIR8 C%" (200?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %$BIR8 D"5."$. T#3 A""$! , T#3 R"5$d J T#3 C%"d! (200?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %$BIR8 D!%#$!8 P%".%!$ 5 !7" A.!$ (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %$BIR8 /#" , /%#d"$! R"!%$ (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %%BIR8 L%d.!$8 R""< R$& 5 !7" C$"% (2006),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %%BIR8 P%".%!" P"%d8 A""$!8 /%#d"$! R"!%$ (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %%BIR8 P%".%!" P"%d8 C%$# A.!$ (2006),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %%BIR8 T#3#"% C A.!$ @ C%$# A.!$ (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %%C! H#!$ 5 T#3 @ C! D!" (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %&C!8 B#8 A!#!. R""< (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %&D"$="$! T#3 R"!%$ (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %7L%d.!$ C! , CTA (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %7+GU C".!$ 5 T#3"F /"" @ C7#%&" (199:),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %7T#3 A$"! , T#3 E3"!$ (2001),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %7T#3#"% Ad$!%#!" @ Ld.# R""d" (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %7T#3#"% A""$! P%!"! C# 5% %"5$d (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %8

T#3#"% A""$!8 I$$.!$ (2004),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %8T#3#"% BIR Ad! % I$"!!$ (1999),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,, %8T#3#"% C! B#%d 5 A""$! D".$8 W7"%" ! #"# (1999),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %T#3#"% C# 5% R"5$d8 P%."d%" (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, %T#3#"% D"5."$. I$." T#3 (199?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,,,,, %T#3#"% E37#!$ 5 Ad$!%#!" R""d" (199:),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, , &"T#3#"% /#%" ! W!77"d @ R"! T#3 (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &"T#3#"% NIRC , TCC R""d" (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &"T#3#"% O"%


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] : of 73T#3#"% P%!"! #$! A""$! (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, T#3#"% P%!"! #$! A""$! (1999),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, T#3#"% P%!"! #$! A""$! (1999),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, T#3#"% P%!"!8 C# 5 R"5$d (1996),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &3T#3#"%8 A"# ! !7" C%! 5 T#3 A"# (200?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &3T#3#"%8 C# 5% T#3 C%"d! (2006),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &3T#3#"%8 C%" #5!"% C%$# A.!$ (199),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &3T#3#"%8 P%!"! #$! A""$!8 D$%> T#3 (199?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &$T#3#"%8 W!77d$& A&"$!8 C# 5 T#3 R"5$d (200?),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &$

+OCA+ @ REA+ PROPERTY TAXES,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &$+.# T#3#!$ A.!# U" 5 P%"%! (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,,, &$+.# T#3#!$ C"%#&" (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &$+.# T#3#!$ E3"!$8 R"# P%"%! T#3" (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &%+.# T#3#!$ I!$ 5 Ad H#%" T#3 (2000),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &%+.# T#3#!$ +"!J C$!!!$#!8 T#3 O%d$#$." (200),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,,,, &%+.# T#3#!$ +"!8 I!$ 5 R"# P%"%! T#3 R#!" (2002),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, &%+.# T#3#!$ P


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics

GENERA+ [email protected] of 73

B#. /"#!%" P%""$! I$." T#3 S!" (1996)What are the basic feat'res of the (resent income ta)s*stem+,SUGGESTED ANSWER

O'r (resent income ta) s*stem can be said to ha-e thefolloing basic feat'res/0a1 2t has ado(ted a CO4RE5E62E TA9

2T: b* 'sing the nationalit*; residence; and

so'rce r'les. This maresidentforeigncor(orations hich are ta)ed on gross income.

b. The income ta) is generall* im(osed -ia theself>

assessment s*stem or (a*>as>*o'>file conce(t

of

im(osing the ta) altho'gh certain incomes.2ncl'dingincome of non>residents; are ta)ed on the (a*>as>*o'>earn conce(t or the so called ithholding ta).

c. The cor(orate income ta) is a one>la*er ta) in that

distrib'tion of (rofits to stoc


9/138

.!$ 5 T#3" A!7%!8 O%d$#% C%! (2001)the co'rts enoin the collection of re-en'e ta)es, E)(lainanser. 0#1

GESTED ANSWER

general r'le; the co'rts ha-e no a'thorit* to enoincollection of re-en'e ta)es. 0ec. #!8; 62RC1.

e-er; the Co'rt of Ta) A((eals is em(oered ton the collection of ta)es thro'gh administrati-e

dies hen collection co'ld eo(ardi=e the interest ofo-ernment or ta)(a*er. 0ection !!; RA !!#%1.

.!$ 5 T#3" P%".%!$ (2001)the collection of ta)es be barred b* (rescri(tion, E)(lainanser. 031

GESTED ANSWER

The collection of ta)es ma* be barred b*ri(tion. The (rescri(ti-e (eriods for collection of are go-erned b* the ta) la im(osing the ta).

e-er; if the ta) la does not (ro-ide for (rescri(tion;right of the go-ernment to collect ta)es becomesescri(tible.

.! T#3 , I$d%".! T#3 (1994)ng'ish a direct from an indirect ta).GESTED ANSWER

2RECT TA9 is one in hich the ta)(a*er ho (a*sa) is directl* liable therefor; that is; the b'rden of

g the ta) falls directl* on the (erson (a*ing the ta).

6D2RECT TA9 is one (aid b* a (erson ho is nottl* liable therefor; and ho ma* therefore shift or

(ass on the ta) to another (erson or entit*; hich'ltimatel* ass'mes the ta) b'rden. 0aceda -. acaraig;!7 CRA 77!1

D%".! T#3 , I$d%".! T#3 (2000)Among the ta)es im(osed b* the B'rea' of 2nternalRe-en'e are income ta); estate and donors ta); -al'e>added ta); e)cise ta); other (ercentage ta)es; anddoc'mentar* stam( ta). Classif* these ta)es into directand indirect ta)es; and differentiate direct from 2ndirectta)es. 0%1SUGGESTED ANSWER

2ncome ta); estate and donors ta) are considered as direct

ta)es. On the other hand; -al'e>added ta); e)cise ta);other (ercentage ta)es; and doc'mentar* stam( ta) areindirect ta)es.

D2RECT TA9E are demanded from the -er* (ersonho; as intended; sho'ld (a* the ta) hich he cannotshift to anotherG hile an 26D2RECT TA9 is demandedin the first instance from one (erson ith the e)(ectationthat he can shift the b'rden to someone else; not as a ta)b't as a (art of the ('rchase (rice.

D%".! T#3 , I$d%".! T#3 (2001)Disting'ish direct ta)es from indirect ta)es; and gi-e ane)am(le for each one. 0#1SUGGESTED ANSWERD2RECT TA9E are ta)es herein both the incidence0or liabilit* for the (a*ment of the ta)1 as ell as theim(act or b'rden of the ta) falls on the same (erson. An


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 9 of 73e)am(le of this ta) is income ta) here the (ersons'bectto ta) cannot shift the b'rden of the ta) to another(erson.

26D2RECT TA9E; on the other hand; are ta)esherein the incidence of or the liabilit* for the (a*mentof the ta) falls on one (erson b't the b'rden thereof can

be shifted or (assed on to another (erson. E)am(le ofthis ta) is the -al'e>added ta).

A+TERNATIHE ANSWER

A direct ta) is a ta) hich is demanded from the (erson

ho also sho'lders the b'rden of the ta). E)am(le/cor(orate and indi-id'al income ta).

An indirect ta) is a ta) hich is demanded from one(erson in the e)(ectation and intention that he shallindemnif* himself at the e)(ense of another; and the

b'rden finall* resting on the 'ltimate ('rchaser orcons'mer. E)am(le/ -al'e added ta).

D%".! T#3 , I$d%".! T#3 (2006)Disting'ish +direct ta)es+ from +indirect ta)es.+ ?i-ee)am(les. 0%1SUGGESTED ANSWER

D2RECT TA9E are demanded from the -er* (ersonho sho'ld (a* the ta) and hich he can not shift toanother. An 26D2RECT TA9 is demanded from one(erson ith the e)(ectation that he can shift the b'rdento someone else; not as a ta) b't as (art of the ('rchase

(rice. E)am(les of direct ta)es are the income ta); the

estate ta) and the donors ta). E)am(les of indirectta)esare the -al'e>added ta); the (ercentage ta) and thee)ciseta) on e)ciseable articles.

D'" T#3#!$ (199:)2s do'ble ta)ation a -alid defense against the legalit* ofa ta) meas're,SUGGESTED ANSWER

6o; do'ble ta)ation standing alone and not beingforbidden b* o'r f'ndamental la is not a -alid defenseagainst the legalit* of a ta) meas're 04e(si Cola -.Tanaan; & CRA $&"1.5oe-er; if do'ble ta)ationamo'nts to a direct d'(licate ta)ation;!. in that the same s'bect is ta)ed tice hen it sho'ld

be ta)ed b't once;#. in a fashion that both ta)es are im(osed for the same('r(ose

3. b* the same ta)ing a'thorit*; ithin the same'risdiction or ta)ing district;

$. for the same ta)able (eriodand%. for the same


11/138

e is no do'ble ta)ation. DO:BEAT2O6 means ta)ing for the same ta) (eriod thething or acti-it* tice; hen it sho'ld be ta)ed b'tb* the same ta)ing a'thorit* for the same ('r(ose

ith the same


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 10 of 730a1 The 6ational 2nternal Re-en'e CodeG0b1 The Tariff and C'stoms CodeG and0c1 The ocal ?o-ernment Code Anser/SUGGESTED ANSWERS

The r'les that ha-e been ado(ted on (rescri(tion are asfollos/0a1 6ational 2nternal Re-en'e Code > The stat'te of

limitation for assessment of ta) if a ret'rn is filed

isithin three 031 *ears from the last da* (rescribedb*la for the filing of the ret'rn or if filed after thelastda*; ithin three *ears from date of act'al filing.2f

no ret'rn is filed or the ret'rn filed is false or

fra'd'lent; the (eriod to assess is ithin TE6EAR from disco-er* of the omission; fra'd or

falsit*.

The (eriod to collect the ta) is ithin T5REEEAR from date of assessment. 2n the case;hoe-er; of omission to file or if the ret'rn filed is

false or fra'd'lent; the (eriod to collect is ithin

TE6 EAR from disco-er* itho't need of anassessment.

0b1 Tariff and C'stoms Code > 2t does not e)(ress an*general stat'te of limitationG it (ro-ided;

hoe-er;that +hen articles ha-e entered and (assed free of

d't* or final ad'stment of d'ties made; ith

s'bseH'ent deli-er*; s'ch entr* and (assage free of

d't* or settlement of d'ties ill; after thee)(irationof O6E 0!1 DEAR; from the date of the final

(a*ment of d'ties; in the absence of fra'd or(rotest;be final and concl'si-e '(on all (arties; 'nlesstheliH'idation of 2m(ort entr* as merel* tentati-e+0ec

!&"3; TCC1.

0c1 ocal ?o-ernment Code > ocal ta)es; fees; orcharges shall be assessed ithin F2E 0%1

EARfrom the date the* became d'e. 2n case of fra'd or

intent to e-ade the (a*ment of ta)es; fees orcharges the same ma*be assessed ithin TE6EAR from disco-er* of the fra'd or intent toe-ade (a*ment. The* shall also be collected eitherb* administrati-e or 'dicial action ithin F2E0%1 EAR from date of assessment 0ec. !$;?C1.

P


13/138

e are s'bstantial differences beteen bigtors being enticed to the +sec'red area+ and the

ness o(erators o'tside that are in accord ith the(rotection cla'se that does not reH'ire territorial

rmit* of las. The classification a((lies eH'all* to allsident indi-id'als and b'sinesses ithin the +sec'red. The residents; being in lithe amo'nt of the ta). (,ee % !ooley

%'-%/").Certainl*; if the ta) is limited to gross incomeitho't ded'ctions of these cor(orations; this is changing

the amo'nt of the ta) as said amo'nt 'ltimatel* de(endson the ta)able base.

P


14/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 11 of 73s*stem of ta)ation b* centrali=ing the im(ositionand collection of all ta)es in the nationalgo-ernment. Accordingl*; it is thin


15/138

dest sco(e of all the (oers of go-ernment'se in the absence of limitations; it is considered as

mited; (lenar*; com(rehensi-e and s'(reme. The toations on the (oer of ta)ation are the inherent andit'tional limitations hich are intended to (re-ent

e on the e)ercise of the otherise (lenar* andmited (oer. 2t is the Co'rts role to see to it that the

ise of the (oer does not transgress theseations.

"% 5 T#3#!$ R".#!$ 5 E3"!$& S!#!!":)Cor(oration as the reci(ient in !" of to ta)

(tions both from Congress; one la e)em(ting thean*s bond iss'es from ta)es and the other(ting the com(an* from ta)es in the o(eration of its ('blices. The to las e)tending the ta) e)em(tions ere


16/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 12 of 73s'bect to an* restrictions hate-er; e)ce(t s'ch as restinthe discretion of the a'thorit* hich e)ercises it. 0Tio -.ideogram Reg'lator* Board; ?.R. 6o. >7%&7; M'ne !8;

!871 o (otent is the (oer to ta) that it as onceo(inedthat +the (oer to ta) in-ol-es the (oer to destro*.+0C.M. arshall in cC'lloch -. ar*land; $ Wheat; 3!& $ .

Ed. %7; &"71

Ps'fficienc* b*directl*granting them general and broad ta) (oers 0anilaElectric Com(an* -. 4ro-ince of ag'na et. al.; 3"& CRA

7%" J!K1.Considering that inasm'ch as the (oer tota)ma* be e)ercised b* local legislati-e bodies; no longer

b*-alid congressional delegation b't b* da'thorit*conferred b* the Constit'tion; in inter(restat'tor*

(ro-isions on m'nici(al fiscal (odo'bts ill;therefore; ha-e to be resol-ed in fa-o

m'nici(alcor(orations 0Cit* ?o-ernment of an 4ag'na -.

Re*es; 3"% CRA 3%3 J!K1.This meansthe co'rtm'st ado(t a liberal constr'ction of agranting am'nici(al cor(oration the (oer to ta).

6ote/ 2f the e)aminee chose (ro(ono. $ as hisanser; it sho'ld be gi-en f'll

considering that

the (resent CTA Act 0R.A. 6o. #8#made the

CTA a coeH'al 'dicial bod* of the of A((eals.The H'estion +Which of the follo

(ro(ositions


17/138

ma* no be 'ntenable+ ma* lead thee)aminee to choose a (ro(osition hich is 'ntenable on the

basis of the ne la des(ite the c't>off date ado(ted b* the BarE)amination Committee. R.A. 6o. #8# as (assed on arch3"; #""$.

" 5 T#3#!$8 +"!" $ N#!%" (2004)s are assessed for the ('r(ose of generating re-en'e to befor ('blic needs. Ta)ation itself is the (oer b* hich theraises re-en'e to defra* the e)(enses of go-ernment. Asaid that a ta) is hat e (a* for ci-ili=ation.2n o'r

diction; hich of the folloing statements ma* beeo's/a)es are (ec'niar* in nat're.

a)es are enforced charges and contrib'tions.Ta)es are im(osed on (ersons and (ro(ert* ithinhe territorial 'risdiction of a tate.

Ta)es are le-ied b* the e)ec'ti-e branch of thego-ernment.

Ta)es are assessed according to a reasonable r'le of

a((ortionment.* *o'r anser or choice briefl*. 0%1?ETED A6WER/Taxes are levied by the executive branch of government.statement is erroneo's beca'se le-* refers to the act(osition b* the legislat're hich is done thro'gh thement of a ta) la. e-* is an e)ercise of the (oer to

hich is e)cl'si-el* legislati-e in nat're and character.l*; ta)es are not le-ied b* the e)ec'ti-e branch ofrnment. 0M4C -. Alba*; !8& CRA !8 J!"K1.

$ S"!-O55 % C"$#!$ 5 T#3" (1996)

9 is the oner of a residential lot sit'ated at N'irinoA-en'e; 4asa* Cit*. The lot has an area of 3"" sH'aremeters. On M'ne !; !$; !"" sH'are meters of said lotoned b* 9 as e)(ro(riated b* the go-ernment to be

'sed in the idening of N'irino A-en'e; for 43"".""".""re(resenting the estimated assessed -al'e of said (ortion.

From !! to !%; 9; ho is a b'sinessman; has notbeen (a*ing his income ta)es. 9 is no being assessedforthe 'n(aid income ta)es in the total amo'nt of4!%";"""."". 9 claims his income ta) liabilit* hasalread*

been com(ensated b* the amo'nt of 43""."""."" hichthe go-ernment oes him for the e)(ro(riation of his(ro(ert*. Decide.SUGGESTED ANSWER

The income ta) liabilit* of 9 can not be com(ensatedith the amo'nt oed b* the ?o-ernment ascom(ensation for his (ro(ert* e)(ro(riated; ta)es are of

distinct


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 1 of 736o. et>off is a-ailable onl* if both obligationsare liH'idated and demandable. iH'idated debts arethose here the e)act amo'nts ha-e alread* beendetermined. 2n the instant case; the claim of theta)(a*er for AT ref'nd is still (ending and theamo'nt has still to be determined. A fortiori; theliH'idated obligation of the ta)(a*er to the go-ernmentcan not; therefore; be set>off against the 'nliH'idated

claim hich the ta)(a*er concei-ed to e)ist in hisfa-or. 04hile) ining Cor(. -. C2R; ?R 6o. !#%7"$;A'g'st #; !81.A+TERNATIHE ANSWER

6o. Ta)es and claims for ref'nd cannot be the s'bectofset>off for the sim(le reason that the go-ernment andtheta)(a*er are not creditors and debtors of each other.

There is a material distinction beteen a ta) and a

claim

for ref'nd. Claims for ref'nds 'st lioff ma* arise; ifthe claims against the go-ernment ha-e beenrecogni=ed and an amo'nt has alread* beena((ro(riated for that('r(ose. Where both claims ha-ealread* become o-erd'e and demandable as ell asf'll* liH'idated. Com(ensation ta


19/138

ing to Re('blic of the 4hili((ines -.b'lao 'mber Co.; ?.R. 6o. >!77#%; Febr'ar* #8; !G andia -. 2ntermediate A((ellate Co'rt; ?.R. 6o. >&7&$; M'ne8.

e is; hoe-er; legal basis to state that an assessmenta local ta) ma* be the s'bect of set>off or(ensation against a final 'dgment for a s'm ofe* obtained b* the ta)(a*er against the localrnment b* o(eration of la here the localrnment and the ta)(a*er are in their on right

rocall* debtors and creditors of each other; and thatdebts are both d'e and demandable. This is consistent

the r'ling in Domingo -. ?arlitos; ?.R. 6o. >!8$;#;!&3; rel*ing '(on Arts. !#78 and !#7 of the Ci-il; here these (ro-isions ere a((lied in relation tonational ta); and sho'ld therefore be a((licable to a

ta).

Ad#$." , T#3 E#$ (1996)ng'ish ta) e-asion from ta) a-oidance.GESTED ANSWER

e-asion is a scheme 'sed o'tside of those laf'lns to esca(e ta) liabilit* and; hen a-ailed of; itl* s'bects the ta)(a*er to f'rther or additional ci-iliminal liabilities. Ta) a-oidance; on the other hand; is

) sa-ing de-ice ithin the means sanctioned b* la;

e legal.

Ad#$." , T#3 E#$ (2000)4asc'als income from leasing his (ro(ert* reaches

ma)im'm rate of ta) 'nder the la. 5e donated one>

half of his said (ro(ert* to a non>stoc(rofit

ed'cational instit'tion hose income and assets are

act'all*; directl* and e)cl'si-el* 'sed for ed'cational('r(oses; and therefore H'alified for ta) e)em(tion 'nderArticle 92; ection $ 031 of the Constit'tion and ection3" 0h1 of the Ta) Code. 5a-ing th's transferred a (ortionof his said asset; r. 4asc'al s'cceeded in (a*ing alesser ta) on the rental income deri-ed from his

(ro(ert*. 2s there ta) a-oidance or ta) e-asion, E)(lain.0#1SUGGESTED ANSWER

There is ta) a-oidance. r. 4asc'al has e)(loited a f'll*

(ermissi-e alternati-e method to red'ce his income ta) b*

transferring (art of his rental income to a ta) e)em(tentit* thro'gh a donation of one>half of the income(rod'cing (ro(ert*. The donation is li


20/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 14 of 73sho'ld not be liable to (a* the sales ta). 2s thisclaim tenable, 0%1SUGGESTED ANSWER

A. 6o. E)em(tion from ta)es is (ersonal in nat're andco-ers onl* ta)es for hich the ta)(a*er>grantee isdirectl*liable. The sales ta) is a ta) on the seller ho isnot

e)em(t from ta)es. ince 9L 2nc. is directl* liableforthe sales ta) and no ta) e)em(tion (ri-ilege is e-ergi-ento him; therefore; its claim that the sale is ta) e)em(t is

not tenable. A ta) e)em(tion is constr'ed instrictissimi1urisand it can not be (ermitted to e)ist '(on -ag'eim(lications 0Asiatic 4etrole'm Co.; td. . lanes; $ 4hil$&& J!#&K1.

Ass'me arg'endo that 9L had to and did (a* the sales

ta). ABC Cor(. later fo'nd o't; hoe-er; that 9L

merel* shifted or (assed on to ABC the amo'nt of thesales ta) b* increasing the ('rchase (rice. ABC Cor(.noclaims for a ref'nd from the B'rea' of 2nternalRe-en'ein an amo'nt corres(onding to the ta) (assed on to itsince it is ta) e)em(t. 2s the claim of ABC Cor(.

meritorio's, 0%1SUGGESTED ANSWER8

B. 6o. The claim of ABC Cor(. is not meritorio's.Altho'gh the ta) as shifted to ABC Cor(. b* the

seller; hat is (aid b* it is not a ta) b't (art of thecost it has ass'med. 5ence; since ABC Cor(. is not ata)(a*er; it has no ca(acit* to file a claim for ref'nd.The ta)(a*er ho can file a claim for ref'nd is the(erson stat'toril* liable for the (a*ment of the ta).

T#3 +#


21/138

th's; shifting the ta) b'rden to the 'ltimate'mer.TABE6E: This concept pertains to the 2AT law which isded from the bar coverage #uidelines for & 3ar 4xaminations% &)

#"% S!8 W7"$ A


22/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 1? of 73(ersonal e)em(tions are arbitrar* amo'ntsalloed b* la.

b. As to nat're Alloable ded'ctions constit'teb'siness e)(enses hile (ersonal

e)em(tions(ertain to (ersonal e)(enses.

c. As to ('r(ose Ded'ctions are alloed toenable the ta)(a*er to reco'( his cost of doing

b'siness hile (ersonal e)em(tions are alloedto co-er (ersonal; famil* and li-ing e)(enses.

d. As to claimants Alloable ded'ctions can beclaimed b* all ta)(a*ers; cor(orate orotherise; hile (ersonal e)em(tions can beclaimed onl* b* indi-id'al ta)(a*ers.

B#. M"#$$& 5 T#3#'" I$." (2000)What is meant b* ta)able income, 0#1SUGGESTED ANSWER

TA9ABE 26COE means the (ertinent items ofgross income s(ecified in the Ta) Code; less theded'ctions andor (ersonal and additionale)em(tions; if an*; a'thori=ed for s'ch t*(es ofincome b* the Ta) Code or other s(ecial las. (,ec. 5%

N6$! of %**')

B#. P%$." 5 !obi"ia #e$%%nt%r &ersona'(1994) What is the (rinci(le of mobilia se7uuntur

personam in income ta)ation,SUGGESTED ANSWER

4rinci(le of 8obilia ,e7uuntur 9ersonam in incometa)ation refers to the (rinci(le that ta)ation follos the(ro(ert* or (erson ho shall be s'bect to the ta).

B#. P%"% A4h(l"."""1 of 4h(";""" bestimated 'sef'l life 0#" *ears1.

6OTE/ The bar candidate ma* gi-e a different f

de(endingon the method he 'sed in com('ting the an

de(reciation.


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facts gi-en in the (roblem are s'fficient to'te the ann'al de(reciation either 'nder the declining>ce method or s'm>of>*ears>digit method. An* anserd at b* 'sing an* of the recogni=ed methods sho'ld bef'll credit. 2t is s'ggested that no H'estion reH'iring

'tation sho'ld be gi-en in f't're bar e)aminations.

. S%." 5 I$." T#3#'" I$." (199)m hat so'rces of income are the folloingonscor(orations ta)able b* the 4hili((inernment,Citi=en of the 4hili((ines residing thereinG J!K6on>resident citi=enG J!!An indi-id'al citi=en of the 4hili((ines ho is

or


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 16 of 73-ol'ntaril* (aid his obligation (re-io'sl* ritten>off to9 Com(an*. 2n the *ear of reco-er*; the entireamo'nt constit'tes (art of gross income of 9 Com(an*beca'se it as able to get f'll ta) benefit three *earsearlier.

B#.8 B# 5 I$." T#3 (1996)9 is em(lo*ed as a dri-er of a cor(orate la*er

and recei-es a monthl* salar* of 4%;"""."" ith freeboard and lodging ith an eH'i-alent -al'e of4!;%""."".!. What ill be the basis of 9s income ta), Wh*#. Will *o'r anser in H'estion 0a1 be the same if 9s

em(lo*er is an obstetrician, Wh*,SUGGESTED ANSWERS

!1 The basis of 9s income ta) o'ld de(end onhether his em(lo*er is an em(lo*ee or a(racticing cor(orate la*er.

6 2f his em(lo*er is an em(lo*ee; the basis of9Fs

income ta) is 4&;%""."" eH'i-alent to the total ofthe

basic salar* and the -al'e of the board andlodging. This is so beca'se the em(lo*ercor(oratela*er has no (lace of b'siness here the freeboard and lodging ma* be gi-en.

6 On the other hand; if the cor(orate la*er is a

+(racticing la*er 0self>em(lo*ed1; 9 sho'ld beta)ed

onl* on 4%;"""."" (ro-ided that the free board and

lodging is gi-en in the b'siness (remises ofthela*er and for his con-enience and that the free

lodging as gi-en to 9 as a condition for

em(lo*ment.

#1 2f the em(lo*er is an obstetrician ho is self>em>(lo*ed; the basis of 9s income ill onl* be 4%;""".""if it is (ro-en that the free board and lodging is gi-enithin the b'siness (remises of said em(lo*er

for his con-enience and that the free lodging isreH'ired to be acce(ted b* 9 as condition forem(lo*ment. Otherise; 9 o'ld be ta)ed on4&;%""."".

B#.8 G% I$." D"5$" (199?)What is +gross 2ncome+ for ('r(oses of the 2ncome ta),SUGGESTED ANSWER

?RO 26COE means all income from hate-erso'rce deri-ed; incl'ding 0b't not limited to1com(ensation for ser-ices; incl'ding fees;commissions; and similar itemsG gross income from

b'sinessG gains deri-ed from dealings in (ro(ert*GinterestG rentsG ro*altiesG di-idendsG ann'itiesG (ri=es andinningsG (ensionsG and (artners distrib'ti-e share ofthe gross income of general (rofessional (artnershi(0ec. #8; 62RC1.A+TERNATIHE ANSWER

a1 ?ross income means all ealth hich flos intothe ta)(a*er other than as a mere ret'rn of ca(ital. 2tincl'des the forms of income s(ecificall* described as

gains and (rofits incl'ding gains derfrom the sale or other dis(osition of ca(ita

b1 ?ross income means income 0in the bsense1 lessincome hich is; b* stat'tor* (ro-isiootherise;e)em(t from the ta) im(osed b* la 0ecRe-. Reg.

6o. #1. ?ross income from b'siness mtotal sales;less cost of goods sold; (l's an* income in-estments


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from incidental or o'tside o(erations or so'rces$3; Re-. Reg. 6o. #1.

.8 I$." , C#!# (199?)does +2ncome+ differ from +ca(ital+, E)(lain.

GESTED ANSWER

me differs from ca(ital in that 26COE is an*h hich flos into the ta)(a*er other than a ret'rn

a(ital hile ca(ital constit'tes the in-estment hich isso'rce of income. Therefore; ca(ital is f'nd hile

me is the flo. Ca(ital is ealth; hile income is thece of ealth. Ca(ital is the tree hile income is the

icente adrigal et al -. Mames RHffert*; 38 4hil. $!$1.

.8 S.7"d#% T%"#!"$! , G'# T%"#!"$! (1994)ng'ish +schedular treatment+ from +global treatment+ asin income ta)ation.

GESTED ANSWER

er a C5ED:ER TE; the -ario'sitems of income (compensation business;professional

me) are classified accordingl* and are accordedrent ta) treatments; in accordance ith sched'lescteri=ed b* grad'ated ta) rates. ince these t*(es of incomereated se(aratel*; the alloable ded'ctions shall li


26/138


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%#!"8 I$." T#38 R"#$#'"$" 5 !7" (2006)

and il-er Cor(oration ga-e e)tra !$th months to all its officials and em(lo*ees in the total amo'nt7% illion. When it filed its cor(orate income ta)n the folloing *ear; the cor(oration declared a netating loss. When the income ta) ret'rn of the

ration as re-ieed b* the B2R the folloing *ear; itoed as item of ded'ction the 47% illion bon's the

oration ga-e its officials and em(lo*ees on thend of 'nreasonableness. The cor(oration claimed thatbon's is an ordinar* and necessar* e)(ense thatd be alloed. 2f *o' ere the B2R Commissioner;

ill *o' resol-e the iss'e, 0%1GESTED ANSWERll disallo the e)(ense. A bon's is ordinar* andsar* here said e)(endit're is 0!1 a((ro(riate and

f'l in the de-elo(ment of the ta)(a*ers b'sinesstens ?aw of

#&!!; Man'ar* #7; !8!1. 5oe-er; since the b'sinesss'ffers from a net o(erating loss; 2 ill r'le that the bon'sis an 'nreasonable e)(ense.

C%%#!"8 I$." C"%#&"8 O55-+$" A%$" (1994)Caledonia Aircargo is an off>line international carrieritho't an* flight o(erations in the 4hili((ines. 2t has;hoe-er; a liaison office in the 4hili((ines hich is d'l*licensed ith the ec'rities and E)change Commission;

established for the ('r(ose of (ro-iding (assenger andflight information; reser-ation and tic7$; A(ril 3"; !87 here the'(reme Co'rt r'led that the income recei-ed in the4hili((ines from the sale of ticline+ airlineis ta)able as income from hate-er so'rce.

C%%#!"8 I$." C"%#&"8 O55-+$" A%$" (200?)An international airline ith no landing rights in the

4hili((ines sold tic


28/138


air carrier from 4hili((ine so'rces 'nder the Ta) Code,[email protected]

!1 6on>-otingG1 of 73

E)(lain. 0%1A+TERNATIHE ANSWER

es. The income deri-ed from the sales of tic


29/138

4referred and c'm'lati-e di-idends at the rate of!"@ (er ann'm; hether or not in an* (eriod the amo'nt isco-ered b* earnings or (roectsG2n the e-ent of dissol'tion of the iss'er; holders of

(referred stoc< shall be (aid in f'll or ratabl* as theassets of the iss'er ma* (ermit before an*distrib'tion shall be made to common stoc


30/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 19 of 73em(lo*er; hence does not constit'te a ta)able fringebenefit. (,ection 55 N4$!).

/%$&" B"$"5! T#3 E"% %"=%"d ! P# (200)A +fringe benefit+ is defined as being an* good; ser-iceor other benefit f'rnished or granted in cash or in (a*ment; can be legall* demanded to (a*theta).

I$!"%"! D"5."$. I$!"%"! d"5$" (199? B#%)What is a +deficienc* interest+ for ('r(oses of theincome ta), 2ll'strate.

SUGGESTED ANSWERDEF2C2E6C 26TERET for ('r(oses of the income

ta) is the interest d'e on an* amo'nt of ta) d'e or

installment thereof hich is not (aid on or before thedate(rescribed for its (a*ment com('ted at the rate of #"@

(er ann'm or the anila Reference Rate; hiche-erishigher; from the date (rescribed for its (a*ment 'ntil itisf'll* (aid.

2f for e)am(le after the a'dit of the boo


31/138

on this latter date ill render the ta)H'ent and ill reH'ire the (a*ment of delinH'enc*st.

P"%$# I$."8 E3"!"d ! /" ITR (199:)achelor as em(lo*ed b* Cor(oration A on the firsting da* of Man'ar* !& on a (art>time basis ith a* of 43;%""."" a month. 5e then recei-ed the !3th

h (a*. 2n e(tember !&; he acce(ted another (art>Mob from Cor(oration B from hich he recei-ed a

com(ensation of 4!$;%""."" for the *ear !&. Thect total ta)es ere ithheld from both earnings.the ithholding ta)es alread* (aid; o'ld he still be

red to file an income ta) ret'rn for his !& income,GESTED ANSWERbeca'se hat is e)em(t from filing are those

id'als ho ha-e total com(ensation income noteding 4&".""" ith the ta)es correctl* ithheld onl*one em(lo*er. 2n this case; e-en if his aggregateensation income from both his em(lo*ers does not

ed 4&".""" and that total ithholding ta)es erectl* ithheld b* his em(lo*ers; the fact that hees com(ensation income conc'rrentl* from to

o*ers at an*time d'ring the ta)able *ear; does not(t him from filing his income ta) ret'rn ($A '"*'

plemented by $$ No. "-*5).

D"!. C%%#!" T#3#!$ (199:)ng the *ear; a domestic cor(oration deri-ed theing items of re-en'e/ 0a1 gross recei(ts from ang b'sinessG 0b1 interests from mone* (lacements in

ban


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 20 of 73ret'rn either as a ta)able gain or a ded'ctible loss.Thegain or loss is arri-ed at b* ded'cting from the (roceeds

of ins'rance 0amo'nt reali=ed1 the basis of the good lost

0ec. 3$0a1; 62RC1. The net income of the cor(oration

shall be s'bect to cor(orate income ta) rate of 3%.

The other items of re-en'e ill not be incl'ded in thecor(orate income ta) ret'rn. The interest from mone*marho'r con-enience store in her

neighborhood. The total income of 9 fo*ear from

the to em(lo*ers does not e)ceed her (ersonal andadditional e)em(tions for the *ear #""". she reH'iredto file an income ta) ret'rn last AE)(lain *o'ranser. 0%1SUGGESTED ANSWER

es. An indi-id'al deri-ing com(ensconc'rrentl* from to or more em(lo*ean* time d'ring the ta)able *ear shallan income ta) ret'rn 0ec. %!0A10#62RC.1A+TERNATIHE ANSWER

2t de(ends. An indi-id'al ith com(ensation incomeis not reH'ired to file an income ta) rethen shemeets the folloing conditionsG 0!1 total grosscom(ensation income does not e)4h(&";"""."" and0#1 the income ta) has been correctl* ithhmeaning


33/138

a) ithheld is eH'al to the ta) d'e. (,ection l(A@ N6$!).

e is no mention in the (roblem of the amo'nt ofnal and additional (ersonal e)em(tion to H'antif*

m'ch is that com(ensation income that did noted the (ersonal and additional (ersonal e)em(tions.e is no; mention; either; of hether or not theo*ers ithheld ta)es and that the amo'nt ithheld is

to the ta) d'e. Whether or not she ill be reH'ired

le an income ta) ret'rn last A(ril !% on the #"""me ill de(end on her com(liance ith therements of the la.

P"%$# I$."8 GSIS P"$$ (2000)Ma-ier is a non>resident senior citi=en. 5e recei-es ahl* (ension from the ?2 hich he de(osits ith46B>a


34/138


fra'd (enalt* beca'se the acco'ntant acted be*ond [email protected]

#1 6o. Re-en'e Reg'lation 6o.21 of 73

#>3limits of his a'thorit*. There is no shoing in the(roblem that Danilo signed the falsified ret'rn orthat it as(re(ared 'nder his direction.IOn the other hand the acco'ntant ma* be heldcriminall*liable for -iolation of the Ta) Code hen he falsifiedthe

ta) ret'rn b* 'nderdeclaring the sale and o-erstating the

e)(ense ded'ctions. 2f Dann*s acco'ntant is a Certified

4'blic Acco'ntant; his certificate as a C4Ashalla'tomaticall* be re-osioner of 2nternal Re-en'e thereafter iss'ed $evenue

$egu-lation No. &-*5 implementing $A. '"* 3 (ro-ides in (art/ec. &. ?eneral 4rofessional 4artnershi(.

The general (rofessional (artnershi( and the

(artners are co-ered b* R.A. 7$&. Th's; in

determining (rofit of the (artnershi(; onl* the

direct costs mentioned in said la are to be

ded'cted from (artnershi( income. Also; the

e)(enses (aid or 2nc'rred b* (artners in their

indi-id'al ca(acities in the (ractice of

their

(rofession hich are not reimb'rsed or (aid b*

the (artnershi( b't are not considered as direct

costs are not ded'ctible from his gross income.

!1 arH'e= and 4ene*ra a Offices filed a ta)(a*erss'it alleging that Re-en'e Reg'lation 6o. #>3

-iolates the (rinci(le of 'niformit* in ta)ation

beca'se general (rofessional (artnershi(s are no

s'bect to (a*ment of income ta) and that there isadifference in the ta) treatment beteenindi-id'alsengaged in the (ractice of their res(ecti-e (rofes>

sions and (artners in general (rofessional

(artnershi(s. 2s this contention correct, E)(lain.

SUGGESTED ANSWER

!1 The contention is not correct. ?e(rofessional(artnershi(s remain to be a non>ta)able enWhat ista)able are the (artners com(rising the sand the* are

obligated to re(ort as income their share inincome ofthe general (rofessional (artnershi( d'the ta)able*ear hether distrib'ted or not. 62T treat(rofessionals as one class of ta)(a*er sothe* shall betreated ali


35/138

ementing RA 6o. 7$& ha-e indeed significantl*ced the items of ded'ction b* limiting it to direct

and e)(enses or the $" of gross recei(ts ma)im'mction in cases here the direct costs are diffic'lt to

mine. The alloance of limited ded'ctions hoe-er;ll in consonance ith the net income ta)ation schemer than the gross income method. While it is tr'e thatall the e)(enses of earning the income might be

ed; this can ell be 'stified b* the fact thatctions are not matters of right b't are matters ofati-e grace.

$#8 I$." T#3 N$-R"d"$! A"$ (2000)

Corte= is a non>resident alien based in 5ong Song. D'ringalendar *ear !; he came to the 4hili((ines se-eral timesta*ed in the co'ntr* for an aggregated (eriod of more than

da*s. 5o ill r. Corte= be ta)ed on his income deri-edso'rces ithin the 4hili((ines and from abroad, 0%1

GESTED ANSWER

Corte= being a non>resident alien indi-id'al ho hasd for an aggregated (eriod of more than !8" da*sg the calendar *ear !; shall for that ta)able *ear

eemed to be a non>resident alien doing b'siness inhili((ines.

idering the abo-e; r. Corte= shall be s'bect to an income

n the same manner as an indi-id'al citi=en and a resident

indi-id'al; on ta)able income recei-ed from all so'rcesn the 4hili((ines. ,ec. & (A) (%)N6$! of %**'@ Th's; heoed to a-ail of the itemi=ed ded'ctions incl'ding the

onal and additional e)em(tions b't s'bect to the r'le onrocit* on the (ersonal e)em(tions. (,ec. 5" (A) to () andn relation to ,ec. & (A) (%) 6bid ,ec. 5 (B) 6bid.@

NCT4: 6t is suggested that full credit should begiven if the examineeDs answer only cover the first twoparagraphs.

P"%$#8 I$." T#3 N$-R"d"$! C!"$ (1999)A Co.; a 4hili((ine cor(oration; has an e)ec'ti-e 041 hois a Fili(ino citi=en. A Co. has a s'bsidiar* in 5ong Song

05S Co.1 and ill assign 4 for an indefinite (eriod toor< f'll time for 5S Co. 4 ill bring his famil* toresidein 5S and ill lease o't his residence in the 4hili((ines.

The salar* of 4 ill be sho'ldered %" b* A Co. hile the

other %"@ (l's ho'sing; cost of li-ing and ed'cationalalloances of 4s de(endents ill be sho'ldered b* 5S

Co. A Co. ill credit the %"@ of 4s salar* to 4s

4hili((ine ban< acco'nt. 4 ill sign the contract ofem(lo*ment in the 4hili((ines. 4 ill also be recei-ingrental income for the lease of his 4hili((ine residence. Are

these salaries; alloances and rentals s'bect to the

4hili((ine income ta), 0%1SUGGESTED ANSWER

The salaries and alloances recei-ed b* 4 are not s'bectto 4hili((ine income ta). 4 H'alifies as a nonresidentciti=en beca'se he lea-es the 4hili((ines for em(lo*ment

reH'iring him to be (h*sicall* (resent abroad most of thetime d'ring the ta)able *ear. (,ection &&(4) N6$!). Anon>resident citi=en is ta)able onl* on income deri-ed from4hili((ine so'rces. (,ection &5 N6$!).The salaries and


36/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 22 of 73alloances recei-ed from being em(lo*ed abroad are

incomes from itho't beca'se these are com(ensation

for ser-ices rendered o'tside of the 4hili((ines.(,ection"& N6$!).

5oe-er; 4 is ta)able on rental income for the lease ofhis 4hili((ine residence beca'se this is an incomederi-ed from ithin; the leased (ro(ert* beinglocated in the 4hili((ines. (,ection "& N6$!).

P"%$#8 I$." T#3 T#3-/%"" E3.7#$&" (199:)Three brothers inherited in !# a (arcel of land -al'ed

for real estate ta) ('r(oses at 43." million hich the*heldin co>onershi(. 2n !%; the* transferred the (ro(ert*toa nel* organi=ed cor(oration as their eH'it* hichas

(laced at the =onal -al'e of 4&." million. 2n e)changeforthe (ro(ert*; the three brothers th's each recei-edsharesof stoc< of the cor(oration ith a total (ar -al'e of 4#."

million or; altogether; a total of 4&." million. 6ob'sinessas done b* the Cor(oration; and the (ro(ert*remainedidle. 2n the earl* (art of !7; one of the brothers; ho

as in dire need of f'nds; sold his shares to the to

brothers for 4#." million. 2s the transaction s'bect toan*internal re-en'e ta) 0other than the doc'mentar* stam(

ta)1,SUGGESTED ANSWER

es. The e)change in !% is a ta)>free e)change so

that

the s'bseH'ent sale of one of the brothers of his sharestothe other to 0#1 brothers in !7 ill be s'bect toincome ta). This is so beca'se the ta)>freee)changemerel* deferred the recognition of income on the

e)change transaction. The gain s'bect to income ta)in

the sale is meas'red b* the difference beteen theselling(rice of the shares 04# illion1 and the basis of the

real

(ro(ert* in the hands of the transferor at the time ofe)change hich is the fair marfreee)change beca'se there is no shoingthe threebrothers gained control of the cor(oratio

acH'iring atleast %! of the -oting rights. ince the egain on thee)change as (re-io'sl* s'bected to incta); then;

the sale ill also be ta)able if a gain retherefrom. 2nthe instant case; the sale ill not be s'bean* internalre-en'e ta) other than the doc'men

stam( ta);

beca'se the seller did not reali=e an* from the sale.

The gain is meas'red b* the differbeteen theamo'nt reali=ed 0selling (rice1 and

basis of the(ro(ert*. 2ncidentall*; the basis to him ishare in the

-al'e of the (ro(ert* recei-ed at the time)change;hich is 4# illion; an amo'nt; 'st eH'the amo'ntreali=ed from the sale.

P"%$#8 I$." T#38 C$!%#.! 5 +"#(199?)

r. Domingo ons a -acant (arcel of landleases theland to r. EnriH'e= for ten *ears rental of4!#;"""."" (er *ear. The condition is thatEnriH'e=


37/138

erect a b'ilding on the land hich illme the (ro(ert* of r. Domingo at the end of the lease't com(ensation or reimb'rsement hatsoe-er for the -al'e

e b'ilding.

EnriH'e= erects the b'ilding. :(on com(letion the

ing had a fair mar


38/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 2 of 73ere the e-ents in the life of the s(o'ses that hadincome ta) incidences,SUGGESTED ANSWER

The e-ents in the life of s(o'ses. ar and Mo*; hichha-e income ta) incidences are the folloing/!1 Their marriage in !" H'alifies them to claim

(ersonal e)em(tion for married indi-id'alsG#1 Their em(lo*ment in !! b* the same com(an*

ill ma


39/138

dance ith the sched'lar grad'ated rates of !@; #@ andbased on the ad'sted gross income deri-ed b* non>ent citi=ens from all so'rces itho't the 4hili((ines d'ringta)able *ear.

'" I$." I" I$." (199? B#%)aoo is a big>time sindler. 2n one *ear he as ablearn 4! illion from his sindling acti-ities. When themissioner of 2nternal Re-en'e disco-ered his income

sindling; the Commissioner assessed him aienc* income ta) for s'ch income. The la*er of r.o (rotested the assessment on the folloing gro'nds/The income ta) a((lies onl* to legal income; not to

illegal incomeGr. aoos recei(ts from his sindling did notconstit'te income beca'se he as 'nder obligation

to ret'rn the amo'nt he had sindled; hence; hisrecei(t from sindling as similar to a loan; hich

is not income; beca'se for e-er* (eso borroed hehas a corres(onding liabilit* to (a* one (esoG and2f he has to (a* the deficienc* income ta) assess>ment; there ill be hardl* an*thing left to ret'rn to the-ictims of the sindling.ill *o' r'le on each of the three gro'nds for the (rotest,

ain.GESTED ANSWERS

The contention that the income ta) a((lies to legal income

not to illegal income is not correct. ection #80a1 of the Ta)e incl'des ithin the ('r-ie of gross income all 2ncomehate-er so'rce deri-ed. 5ence; the illegalit* of the income

not (recl'de the im(osition of the income ta) thereon.

The contention that the recei(ts from his sindlingnot constit'te income beca'se of his obligation to

ret'rn the amo'nt sindled is li


40/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 24 of 73E)(lain briefl* hether the folloing items are ta)ableor non>ta)able/ 0%1a1 2ncome from M:ETE6?GSUGGESTED ANSWER

Ta)able. ?ross income incl'des +all income deri-edfromhate-er so'rce+ (,ec. 5&A@ N6$!) hich asinter(reted as all income not e)(ressl* e)cl'ded or

e)em(ted from the class of ta)able income; irres(ecti-eofthe -ol'ntar* or in-ol'ntar* action of the ta)(a*erin

(rod'cing the income. Th's; the income ma* (roceedfrom a legal or illegal so'rce s'ch as from

'eteng.:nlaf'l gains; gambling innings; etc. are s'bect

toincome ta). The ta) code stands as an indifferent ne'tral

(art* on the matter of here the income comes from.0Commissioner of 2nternal Re-en'e -. anning; ?.R. 6o. >

#838; A'g'st &; !7%1

b1 ?ain arising from E94RO4R2AT2O6 OF4RO4ERTGSUGGESTED ANSWER

Ta)able. ale e)change or other dis(osition of (ro(ert*to the go-ernment of real (ro(ert* is ta)able. 2tincl'des ta!$%3#; a* #&; !&%1

c1 TA9E (aid and s'bseH'entl* ref'ndedGSUGGESTED ANSWER

Ta)able onl* if the ta)es ere (aid and claimed

asded'ction and hich are s'bseH'entl* ref'nded or

credited. 2t shall be incl'ded as (art of gross income inthe*ear of the recei(t to the e)tent of the income ta)benefitof said ded'ction. (,ec. 5"!@%@ N6$!)6ot ta)able iftheta)es ref'nded ere not originall* claimed asded'ctions.

d1 Reco-er* of BAD DEBT (re-io'sl* charged offGSUGGESTED ANSWER

Ta)able 'nder the TA9 BE6EF2T R:E. Reco-er* ofbad debts (re-io'sl* alloed as ded'ction inthe

(receding *ears shall be incl'ded as (art of thegrossincome in the *ear of reco-er* to the e)tent of theincometa) benefit of said ded'ction. (,ec. 5"4@%@ N6$!)This issometimes referred as the RECA4T:RE R:E.

e1 ?ain on the sale of a car 'sed for (ersonal ('r(oses.SUGGESTED ANSWER

Ta)able. ince the car is 'sed for (ersonal ('r(oses; itis considered as a ca(ital asset hence the gain is

considered income. (,ec. 5&A@5@ and 5*A@%@ N6$!)

W!77d$& T#3 N$-R"d"$! A"$ (22s a non>resident alien ho is not engagetrade or b'siness or in the e)ercise(rofession in the 4hili((ines b't ho derental income from the 4hili((ines reH

to file an income ta) ret'rn on A(ril of thefolloing his recei(t of said income, 2fh* not, E)(lain *o'r anser. 0%1SUGGESTED ANSWER

6o. The income ta) on all incderi-ed from4hili((ine so'rces b* a non>resident aho is notengaged in trade or b'siness in the 4hili((is ithheldb* the lessee as a Final Withholding

(,ection '(A)N6$!). The go-ernment can not re

(ersons o'tside


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territorial 'risdiction to file a ret'rnG for this reason; theme ta) on income deri-ed from ithin m'st be collected'gh the ithholding ta) s*stem and th's relie-e theient of the income the d't* to file income ta) ret'rns.ion % N6$!).

7d$& T#3 R"!%""$! B"$"5! (2000)tart a b'siness of his on; r. ario de ?'=man

d for an earl* retirement from a (ri-ate com(an*ten 0!"1 *ears of ser-ice. 4'rs'ant to the com(an*s

fied and a((ro-ed (ri-ate retirement benefit (lan; he(aid his retirement benefit hich as s'bected to

holding ta). 2s the em(lo*er correct in ithholding

), E)(lain. 0#1GESTED ANSWERde(ends. An em(lo*ee retiring 'nder a com(an*s H'alifiedri-ate retirement (lan can onl* be e)em(t from income ta)is retirement benefits if the folloing reH'isites are met/that the retiring em(lo*ee m'st ha-e been in ser-ice

of the same em(lo*er for at least ten 0!"1 *earsGhat he is not less than %" *ears of age at the time of

etirementG andhe benefit is a-ailed of onl* once.

he instant case; there is no mention hether theo*ee has li


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 2? of 73The SB>4hils. is a BO2>registered domesticcor(orationlicensed b* the SB of the :nited Singdom todistrib'te; s'((ort and 'se in the 4hili((ines itscom('tersoftare s*stems; incl'ding basic and related materialsforban4hils. (ro-ides cons'ltanc* and

technical ser-ices incidental thereto b* entering into

licensing agreements ith ban4hils. (a*s ro*alt* totheSB>:S; net of !% ithholding ta) (rescribed b*theR4>:S Ta) Treat*.

2s the income of the SB>4hils. 'nder the licensingagreement ith ban4hils. 'nder the licensing

agreement ith bandimin'tion of the salariemembers of the

'diciar* d'ring their contin'ance in ofThe clearintent of the Constit'tional Commission

framed the

Constit'tion is to s'bect their salaries to tain the caseof all ta)(a*ers. 5ence; the ded'ctioithholdingta)es; being a manner of collecting the incta) ontheir salar*; is not a dimin'contem(lated b* thef'ndamental la. 06itafan et. al. -. C2R;CRA #8$J!87K1.

W!77d$& T#38 D"!. C%%#C#7 Dd"$d(2001)What do *o' thin< is the reason h* di-idends;hen recei-ed b* a resident citi=enalien from adomestic cor(oration; are ta)ed onl* afinal ta) of!"@ and not at the (rogressi-e ta) sched'le 'nderection #$0A1 of the Ta) Code, E)(*o'r anser.0%1

SUGGESTED ANSWERThe reason for im(osing final ithholdingrather thanthe (rogressi-e ta) sched'le on cash di-idrecei-ed b*


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ident citi=en or alien from a domesticoration; is to ens're the collection of income ta) onncome. 2f e s'bect the di-idend to the (rogressi-eate; hich can onl* be done thro'gh the filing ofme ta) ret'rns; there is no ass'rance that the ta)(a*erdeclare the income; es(eciall* hen there are other

of gross income earned d'ring the *ear. 2t o'ld bemel* diffic'lt for the B2R to monitor com(liancedering the h'ge n'mber of stoc


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 26 of 73(romoting and o(erating the Binatra ho; the*engaged in an acti-it* cond'cted for (rofit. 02bid.1

0b1 The income of Fran< Binatra; a non>resident alien

'nder o'r la is ta)able at the rate of 3"@;final

ithholding ta) based on the gross income from

the sho. r. Binatra is not engaged in an*trade orb'siness in the 4hili((ines.

W!77d$& T#38 N$-R"d"$! C%%#!$ (1994)Bates Ad-ertising Com(an* is a non>residentcor(orationd'l* organi=ed and e)isting 'nder the las of

inga(ore.2t is not doing b'siness and has no office in the4hili((ines. 4ili(inas ?arment 2ncor(orated; a domestic

cor(oration; retained the ser-ices of Bates to do all the

ad-ertising of its (rod'cts abroad. For said ser-ices;Batesfees are (aid thro'gh o'tard remittances. Are the fees

recei-ed b* Bates s'bect to an* ithholding ta),:??ETED A6WER/The fees (aid to Bates Ad-ertising Co.; a non>resident

foreign cor(oration are not s'bect to ithholding ta)

since the* are not s'bect to 4hili((ine ta). The* are

e)em(t beca'se the* do not constit'te income from4hili((ine so'rces; the same being com(ensation

forlabor or (ersonal ser-ices (erformed o'tside the4hili((ines 0ec. 3&Ic1 031 and ec. #%0b10l1; Ta) Code1.

W!77d$& T#38 R"#d"% D&"! A


45/138

b't not more than ten 0!"1 *ears 0!st (ar.; ec. #%%;C1.

E6T/ 2t is s'ggested that an* of the folloing ansers to theon; +What are the liabilities for fail're to ithhold s'ch a ta),+ bef'll credit/The (a*or shall be liable for the (a*ment of the ta) hichas not ithheld.The (a*erithholding agent shall be liable to both ci-il

and criminal (enalties im(osed b* the Ta) Code.

7d$& T#38 T" D"! I$!"%"!8 GSIS P"$$4)bel antos; a retired ('blic school teacher; relies on her

on from the ?2 and the 2nterest 2ncome from a timesit of 4%""."""."" ith ABC Ban


46/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 2: of 73Another reason for its non>ded'ctibilit* is the fact thatit can be considered as an illegal com(ensation madeto a go-ernment em(lo*ee. This is so beca'se if theins'red; his estate or heirs ere made as the beneficiar*(because of the re7uirement of insurable interest) ; the(a*ment of (remi'm ill constit'te bribes hich arenot alloed as ded'ction from gross income (,ection5"A@l@c@ N6$!).

On the other hand; if the com(an* as made thebeneficiar*; hether directl* or indirectl*; the (remi'mis not alloed as a ded'ction from gross income(,ection 5AF%"@ N6$!).

D"d.!$ A$! 5% B%'" (2001)2n order to facilitate the (rocessing of its a((lication fora license from a go-ernment office; Cor(oration Afo'nd it necessar* to (a* the amo'nt of 4h( !"";""" asa bribe to the a((ro-ing official. 2s the 4h( !"";"""ded'ctible from the gross income of Cor(oration A, Onthe other hand; is the 4h( !"";""" ta)able income of the

a((ro-ing official, E)(lain *o'r ansers. 0%1SUGGESTED ANSWERince the amo'nt of 4h(l"".""" constit'tes a bribe; it is

not alloed as a ded'ction from gross income ofCor(oration A; (,ection 5"(A)(l)(c) N6$!). 5oe-er;tothe reci(ient go-ernment official; the same constit'tes a

ta)able income. All income from legal or illegalso'rces

are ta)able absent an* clear (ro-ision of lae)em(ting

the same. This is the reason h* gross income had been

defined to incl'de income from hate-er so'rcederi-ed.(,ection 5&(A) N6$!). 2llegall* acH'ired incomeconstit'tesreali=ed income 'nder the claim of right doctrine0R't


47/138

ar* gains hich are s'bect to a higher ratecome ta). (!hirelstein

or machiner* is a ded'ctible item from gross income.a gi-es the ta)(a*er the o(tion to claim as a ded'ction oras ca(ital e)(endit're interest in>

ed to acH'ire (ro(ert* 'sed in trade; b'siness or e)erciserofession. (,ection 5"(3) (5) N6$!).

De(reciation for goodill is not alloed as de>on from gross income. While intangibles ma*be

ed to be de(reciated or amorti=ed; it is onl* alloedose intangibles hose 'se in the b'siness or trade isitel* limited in d'ration. 0Basilan Estates; 2nc. -;

#! CRA !71. 'ch is not the case ith goodill.

RNATIHE ANSWER

eciation of goodill is alloed as a ded'ction fromincome if the goodill is acH'ired thro'gh ca(ital

* and is stoc(rofited'cational instit'tion to be 'sed b* the latter in b'ildinga s(orts com(le) for st'dents.A. a* the donor claim in f'll as ded'ction from its

gross income for the ta)able *ear #""! the amo'nt ofthe donated lot eH'i-alent to its fair mar


48/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 2 of 73B. 2n order that donations to non>stoc(rofited'cational instit'tion ma* be e)em(t from the

donors gift ta); it is reH'ired that not more than3"of the said gifts shall be 'sed b* the donee>instit'tionfor administration ('r(oses. 0ec. !"!0A1031;

62RC1.

D"d.!$ N$-D"d.!'" I!"8 G% I$."(1999)E)(lain if the folloing items are ded'ctible from grossincome for income ta) ('r(oses. Disregard ho is the(erson claiming the ded'ction. 0%1!. Reser-es for bad debts.#. Worthless sec'ritiesSUGGESTED ANSWER

!. REERE FOR BAD DEBT are not alloed asded'ction from gross income. Bad debts m'st becharged off d'ring the ta)able *ear to be alloed

as

ded'ction from gross income. The mere setting '(ofreser-es ill not gi-e rise to an* ded'ction.

0ection3$0E1. 6TRC1.

&. WORT5E EC:R2T2E; hich are ordinar*assets; are not alloed as ded'ction from gross

income beca'se the loss is not reali=ed. 5oe-er;if these orthless sec'rities are ca(ital assets; theoner is considered to ha-e inc'rred a ca(ital lossas of the last da* of the ta)able *ear and; therefore;ded'ctible to the e)tent of ca(ital gains. (,ection

5"(B)(") N6$!). This ded'ction; hoe-er; is notalloed to a ban< or tr'st com(an*. (,ection 5"(4)(&) N6$!).

D"d.!$ R"=!"8 D"d.'! 5 # + (199)?i-e the reH'isites for ded'cibilit* of a loss. 0%!SUGGESTED ANSWER

The reH'isites for ded'cibilit* of a loss are!1loss belongs to the ta)(a*erG#1 act'all* s'stained and charged off d'ring theta)able

*earG31e-idenced b* a closed and com(leted transactionG$1not com(ensated b* 2ns'rance or other forms of

indemnit*G%1not claimed as a ded'ction for estate ta) ('r(oses in

case of indi-id'al ta)(a*ersG and&1if it is a cas'alt* loss it is e-idenced b* a declarationof

loss filed ithin $% da*s ith the B2R.

COMMENT

The H'estion is -ag'e. There are different


49/138

he* are not alloed to ded'ct an* itemtheir gross income for ('r(oses of com('ting their net

ble income. With the (assage of the Com(rehensi-eReform Act of !7; is this com(laint still -alid,

ain *o'r anser. 0%1GESTED ANSWER

more. ?ross com(ensation income earners are no alloedast an item of ded'ction in the form of (remi'm

ments on health andor hos(itali=ation ins'rance in annt not e)ceeding 4#;$"" (er ann'm Jection 3$01K. This

ction is alloed if the aggregate famil* income do not e)ceed""" and b* the s(o'se; in case of married indi-id'al; ho

ms additional(ersonal e)em(tion for de(endents.

.!$8 H#$7$& D"d.!$8 P%" (2006)shing ded'ction is a-ailed of b* ta)(a*ers to/

Correct his acco'nting records to reflect the act'al

ctions madeRed'ce his gross incomeRed'ce his o't('t -al'e>added ta) liabilit*Red'ce his gross estatese the correct anser. E)(lain. 0%1

GESTED ANSWER

red'ce his gross estate. anishing ded'ction or (ro(>(re-io'sl* ta)ed is one of the items of ded'ction alloedm('ting the net estate of a decedent (,ection /A@&@ and@&@ N6$!).

$ @ I$.$8 G% R"."! (2006)ress enacts a la im(osing a % ta) on gross recei(tsommon carriers. The la does not define the term

+gross recei(ts.+ E)(ress Trans(ort; 2nc.; a b's com(an*(l*ing the anila>Bag'io ro'te; has time de(osits ithABC Ban


50/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 29 of 73Disting'ish +E)cl'sion from ?ross 2ncome+from +Ded'ctions From ?ross 2ncome+. ?i-e ane)am(le of each. 0#1SUGGESTED ANSWER

E9C:2O6 from gross income refer to a flo ofealth to the ta)(a*er hich are not treated as (art of

gross income; for ('r(oses of com('ting the ta)(a*ers

ta)able income; d'e to the folloing reasons/ 0!1 2tise)em(ted b* the f'ndamental laG 0#1 2t is e)em(ted b*

stat'teG and 031 2t does not come ithin the definition of

income. 0ection &!; RR 6o. #1. DED:CT2O6 fromgross income; on the other hand; are the amo'nts; hichthe la allos to be ded'cted from gross income inorderto arri-e at net income.

E)cl'sions (ertain to the com('tation of gross income;

hile ded'ctions (ertain to the com('tation of net

income. E)cl'sions are something recei-ed or earned b*

the ta)(a*er hich do not form (art of gross incomehile ded'ctions are something s(ent or (aid in earning

gross income.

E)am(le of an e)cl'sion from gross income is (roceeds

of life ins'rance recei-ed b* the beneficiar* '(onthe death of the ins'red hich is not an income or!3th month (a* of an em(lo*ee not e)ceeding43".""" hich is an income not recogni=ed for ta)('r(oses. E)am(le of a ded'ction is b'siness rental.

E3.$ @ I$.$ B"$"5! $ A..$! 5I$%(199?)r. 2nfante as hit b* a a*ard b's hile on his a*toor


51/138

h are e)cl'sions from gross income ('rs'antction #80b10%1 of the Ta) Code.

$ @ I$.$ E3".!" B"$"5! (199?)Adrian is an e)ec'ti-e of a big b'siness cor(oration. Aside

his salar*; his em(lo*er (ro-ides him ith the folloingfits/ free 'se of a residential ho'se in an e)cl'si-ei-ision; free 'se of a limo'sine and membershi( in atr* cl'b here he can entertain c'stomers of theration. Which of these benefits; if an*; m'st r. Adriant as income, E)(lain.

GESTED ANSWER

Adrian m'st re(ort the im('ted rental -al'e of the ho'se and

'sine as income. 2f the rental -al'e e)ceeds the (ersonal needsr. Adrian beca'se he is e)(ected to (ro-ide accommodationid ho'se for com(an* g'ests or the car is 'sed (artl* for

ness ('r(ose; then r. Adrian is entitled onl* to a ratablel -al'e of the ho'se and limo'sine as e)cl'sion from gross

me and onl* a reasonable amo'nt sho'ld be re(orted asme. This is beca'se the free ho'sing and 'se of the limo'sinei-en (artl* for the con-enience and benefit of the em(lo*erctor -s. 5enderson1.

RNATIHE ANSWER

'neration for ser-ices altho'gh not gi-en in the formash constit'tes com(ensation income. Accordingl*;

al'e for the 'se of the residential ho'se is (art of hisensation income hich he m'st re(ort for income

('r(oses. 5oe-er; if the residential ho'se gi-en toAdrian for his free 'se as an e)ec'ti-e is also 'sed forbenefit of the cor(orationem(lo*er; s'ch as fortaining c'stomers of the cor(oration; onl* %"@ of

the rental -al'e or de(reciation 0if the ho'se is oned b*the cor(oration1 shall form (art of com(ensation income0RAO !>871.

The free 'se of a limo'sine and the membershi( in aco'ntr* cl'b is not (art of r. Adrians com(ensationincome beca'se the* ere gi-en for the benefit of theem(lo*er and are considered to be necessar* incidents for

the (ro(er (erformance of his d'ties as an e)ec'ti-e of

the cor(oration.

The membershi( fee in the co'ntr* cl'b needs to be

re(orted as income. 2t a((ears that the membershi( ofr. Adrian to the co'ntr* cl'b is (rimaril* for the benefitand con-enience of the em(lo*er. This is to enable r.Adrian to entertain com(an* g'ests 0Collector -s.5enderson1.

E3.$ @ I$.$8 A"!8 R"d"$! A"$ (200?)Ral(h Donald; an American citi=en; as a to( e)ec'ti-e

of a :.. com(an* in the 4hili((ines 'ntil he retired in!. 5e came to li


52/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 0 of 73a


53/138

reached 'nder the terms of hich MR asthe folloing amo'nts/ 4%"";"""."" for his

tali=ationG 4#%";"""."" as moral damagesG and;"""."" for loss of income d'ring the (eriod of his

ment and rec'(eration. 2n addition; MR recei-ed fromm(lo*er the amo'nt of 4#"";"""."" re(resenting theeH'i-alent of his earned -acation and sic< lea-es.h; if an*; of the amo'nts he recei-ed are s'bect to

me ta), E)(lain. 0%1GESTED ANSWER

amo'nts recei-ed from the airline com(an* are e)cl'ded

gross income. :nder ec. 3#0B10$1 of the 62RC; amo'nts ofges recei-ed; hether b* s'it or agreement; on acco'nt of

nal in'ries or sic


54/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 1 of 73em(lo*er for the em(lo*ers con-enience hich arenecessar* incidents to (ro(er (erformance of themilitar* (ersonnels d'ties.

E3.$ @ I$.$8 G5! "% #$d #'"!7" R"!%""$! P# (199?)r. N'iro= or


55/138

$ @ I$.$8 ITR8 1*!7 $!7 # #$d$ '"$"5! (200?)ith reasons the ta) treatment of the folloing in the

aration of ann'al income ta) ret'rns/ !3th month (a* and demisbenefitsGGESTED ANSWER

!3th month (a* not e)ceeding 43";"""."" shall not beted in the income ta) ret'rn beca'se it is e)cl'ded from gross

me 0,ec. 5&3@'@ e@ N6$!1 The amo'nt of the !3thh (a* in e)cess of 43";"""."" shall be re(orted in the ann'al

me ta) ret'rn.

minimis benefits hich do not e)ceed the ceilings

)cl'ded from gross income; and not to be considereddetermining the 43";"""."" ceiling hence nottable in the ann'al income ta) ret'rn. (,ec.%A@5@ $.$. &-*/ as amended by ,ec. &.55 !@ ander amended by $.$. No. /-&)

$ @ I$.$8 ITR8 Dd"$d %".""d ' #"!. .%%#!$ (200?)

ith reasons the ta) treatment of the folloing in(re(aration of ann'al income ta) ret'rns/ Di-idends-ed b* a domestic cor(oration from 0i1 anotherstic cor(orationG and 0ii1 a foreign cor(orationG

GESTED ANSWER

Di-idends recei-ed b* a domestic cor(oration from a

estic cor(oration shall not be s'bect to ta) 0ec.KJ$K; 62RC1; hence; e)cl'ded from the income ta)n.

i-idends recei-ed b* a domestic cor(oration from a foreignration form (art of the gross income and are accordingl*

s'bect to net income ta); hence incl'ded in the ann'al

2TR 0ec. $#JAKJ#KJbK; 62RC1; hence; m'st be incl'ded inthe income ta) ret'rn.

E3.$ @ I$.$8 ITR8 I$." %"#"d 5%#"(200?)tate ith reasons the ta) treatment of the folloing inthe (re(aration of ann'al income ta) ret'rns/ 2ncomereali=ed from sale of/ 0i1 ca(ital assetsG and 0ii1 ordinar*

assets.SUGGESTED ANSWER

0i1 2ncome reali=ed from sale of ca(ital assets is s'bect to

the final ithholding ta) at so'rce and therefore e)cl'ded

from the 2ncome Ta) Ret'rn 0ec. #$JCK and JDK; 62RC1G

0ii1 2ncome reali=ed from sale of ordinar* assets is (art of?ross 2ncome; incl'ded in the 2ncome Ta) Ret'rn. 0ec.3#JAKJ3K; 62RC1

E3.$ @ I$.$8 ITR8 I$!"%"! $ d"! (200?tate ith reasons the ta) treatment of the folloing inthe (re(aration of ann'al income ta) ret'rns/ 2nterest onde(osits ith/ 0i1 B42 Famil* Ban


56/138

Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] 2 of 73final ta) it is not to be incl'ded in the ann'al 2TR.0ec. #$JBKJ!K; 62RC1 0'1 ame as 6o. 01.

E3.$ @ I$.$8 ITR8 P%.""d 5 5"$%#$."(200?)tate ith reasons the ta) treatment of the folloing in

the (re(aration of ann'al income ta) ret'rns/ 4roceedsoflife ins'rance recei-ed b* a child asirre-ocablebeneficiar*GSUGGESTED ANSWER

6ot to be re(orted in the ann'al income ta) ret'rnsbeca'se the (roceeds of the life ins'rance are e)cl'dedfrom gross income. 4roceeds of ife ins'rance

(olicies(aid to the heirs or beneficiaries'(on the death of the ins'red is an e)cl'sion from gross

income. (,ec.5&3@l@N6$!)

E3.$ @ I$.$8 +5" I$%#$." P. (200)On 3" M'ne #"""; 9 too< o't a life ins'rance (olic* onhison life in the amo'nt of 4#;""";"""."". 5e designated

his ife; ; as irre-ocable beneficiar* to4!;""";""".""and his son; L; to the balance of 4!;""";"""."" b't; inthelatter designation; reser-ing his right to s'bstit'te himforanother. On "! e(tember #""3; 9 died and his ifeandson ent to the ins'rer to collect the (roceeds of 9s

lifeins'rance (olic*. 0810a1 Are the (roceeds of the ins'rance s'bect to

income ta) on the (art of D and L for theirres(ecti-e shares, E)(lain.

0b1 Are the (roceeds of the ins'rance to form (art ofthe gross estate of 9, E)(lain.

SUGGESTED ANSWERS

0a1 6o. The la e)(licitl* (ro-ides that (roceeds of

life ins'rance (olicies (aid to the heirs or beneficiaries'(on the death of the ins'red are e)cl'ded from gross

income and is e)em(t from ta)ation. The (roceedsof life ins'rance recei-ed '(on the death of theins'red constit'te a com(ensation for the loss of life;

hence a ret'rn of ca(ital; hich is be*ond the sco(eof income ta)ation. (,ection 5&(3)(%) %**' Tax !ode)

0b1 Onl* the (roceeds of 4!;""";"""."" gi-en to theson;L; shall form (art of the ?ross Estate of 9. :nder theTa) Code; (roceeds of life ins'rance shall form (art of

the gross estate of the decedent to the e)tent of theamo'nt recei-able b* the beneficiar* designated inthe

(olic* of the ins'rance e)ce(t hen it ise)(ressl*sti('lated that the designation of the beneficiar* is

irre-ocable. As stated in the (roblem; onl* the

designationof is irre-ocable hile the ins'reddece

reser-ed

the right to s'bstit'te L as beneficiar*another (erson.Accordingl*; the (roceeds recei-ed b* be e)cl'dedhile the (roceeds recei-ed b* L shalincl'ded in thegross estate of 9. (,ect;on /(4) %**' !ode)

E3"!$ C7#%!#'" I$!!!$ (200Article 2; ection #8 031 of the4hili((ineConstit'tion (ro-ides that chariinstit'tions;ch'rches and (ersonages or co-ena(('rtenantthereto; mosH'es; non>(rofit cemeteriesall lands;

b'ildings and im(ro-ements act'directl* and


57/138

'si-el* 'sed for religio's; charitable orational ('r(oses shall be e)em(t from ta)ation.o hat (rofit cemeteries and lands;ings and im(ro-ements act'all*; directl* and e)cl'>

* 'sed for religio's; charitable and ed'cational

oses. erc* 5os(ital is a !"">bed hos(ital organi=edcharit* (atients. Can said hos(ital claim e)em(tion

ta)ation 'nder the abo-e>H'oted constit'tionalsion, E)(lain.

GESTED ANSWER

es. erc* 5os(ital can claim e)em(tion from ta)ation

'nder the (ro-ision of the Constit'tion; b't onl* ithres(ect to real (ro(ert* ta)es (ro-ided that s'ch real

(ro(erties are 'sed act'all*; directl* and e)cl'si-el* forcharitable ('r(oses.

E3"!$ Ed.#!$# $!!!$ (2004)'((ose that 9L Colleges is a (ro(rietar* ed'cationalinstit'tion oned b* the Archbisho(s famil*; rather than

the Archdiocese; hich of those abo-e cited income anddonation o'ld be e)em(t from ta)ation, E)(lain briefl*.0%1

SUGGESTED ANSWER2f 9L Colleges is a (ro(rietar* ed'cational instit'tion;all of its income from school related and non>schoolrelated acti-ities ill be s'bect to the income ta) basedon its aggregate net income deri-ed from both acti-ities0ection #70B1; 6C1. Accordingl*; all of the incomeen'merated in the (roblem ill be ta)able.

The donation of lot and b'ilding ill listoc< entit* (a*ing no di-idends.

ince the donee is a (ro(rietar* ed'cational instit'tion;

the donation is ta)able 0ection !"!0A931; 6MRC1.

E3"!$ G5! @ D$#!$ (1994)2n !!; 2melda ga-e her (arents a Christmas gift of 4!"";"""."" and a donation of 4%";"""."" to her (arish


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics [email protected] of 73ch'rch. he also donated a (arcel of land for theconstr'ction of a b'ilding to the 4:4 Al'mniAssociation; a non>stoc(rofit organi=ation.4ortions of the b'ilding shall be leased to generateincome for the association.!1 2s the Christmas gift of 4 !"";"""."" to 2meldas(arents s'bect to ta),#1 5o abo't the donation to the (arish ch'rch,

31 5o abo't the donation to the 4.:.4; Al'mniAsso>ciation,SUGGESTED ANSWER

!1 The Christmas gift of 4!"";"""."" gi-en b* 2meldato

her (arents is ta)able '( to 4%";"""."" beca'se'nder

the la (,ec. *& (a) of the Tax !ode)net giftsnot e)ceeding 4%";"""."" are e)em(t.

#1 The donation of 4%";"""."" to the (arish ch'rche-en ass'ming that it is e)cl'si-el* for

religio's

('r(oses is not ta)>e)em(t beca'se the e)em(tion

granted 'nder Article 2; ec. #8031 of the

Constit'tion a((lies onl* to real estate ta)es0ladoc-. Commissioner; !$CRA##1.

31 The donation to the 4.:.4. Al'mni Associationdoes

not also H'alif* for e)em(tion both 'nder theConstit'tion and the aforecited la beca'se it is not

an ed'cational or research organi=ation;cor(oration; instit'tion; fo'ndation or tr'st.

A+TERNATIHE ANSWER

Donation to the 4.:.4. Al'mni Association is e)em(t

from donors ta) if it is (ro-en that the association is anonstoc(rofit charitable association; (a*ingnodi-idends; go-erned b* tr'stees ho recei-e no

com(ensation; and de-oting all its income to theaccom(lishment and (romotion of the ('r(osesen'merated in its articles of incor(oration. 6ot morethan3"@ of the gift sho'ld be 'sed for administration('r(oses b* the donee.

E3"!$ "#d 5 !7" /# (199)Arnold; ho is single; cohabits ith ilma; ho islegall*married to Lachar*. Arnold and ilma ha-e si)minorchildren ho li-e and de(end '(on Arnold for theirchiefs'((ort. The children are not married and not gainf'll*

em(lo*ed.!1 For income ta) ('r(oses; ma* Arnold be considered

as +head of a famil*,+ J3K#1 2s Arnold entitled to ded'ct from his gross income;

an additional e)em(tion for each of hisillegitimate child, J#K

SUGGESTED ANSWER

%) es. An 'nmarried man ho has illeminor

children ho li-e ith him and de(en

'(on him

for their chief s'((ort is considered a+head of the

famil*+ 0$$ No. &-*/ implementing

,ection 5 N6$!).#1 6o. Arnold is onl* entitled to ded'additional

(ersonal e)em(tion for fo'r 0$1 o'the si) 0&1 illegitimate children. ma)im'm n'mber of de(endent('r(oses of the additional (erse)em(tion is fo'r. 0ec. 3%; 62RC1.

E3"!$ N$-P%5! Ed.#!$# I$(2000)


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er Article 9T; ection $ 031 of the !87((ine Constit'tion; all re-en'es and assets of non>; non(rofit ed'cational instit'tions; 'sed act'all*;tl* and e)cl'si-el* for ed'cational ('r(oses; are(t from ta)es and d'ties. Are income deri-ed fromitories; canteens and boostoc< and non(rofit ed'cationalinstit'tion is e)em(t from ta)ation onl* +in res(ect to

income recei-ed b* them as s'ch+ co'ld not affect theconstit'tional ta) e)em(tion. Where the Constit'tion

does not disting'ish ith res(ect to so'rce or origin; theTa) Code sho'ld not ma


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Answers to the BAR: Taxation 1994-2006 (Arranged by Topics sirdondee@gmail.

1994-2006 Bar Exam Question in Taxation

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