JURISTS BAR REVIEW CENTER
™
SUGGESTED ANSWERS TO THE 2018 JURISTS TAXATION LAW MOCK BAR EXAMINATION
I The tax law is not violative of the constitution. Under the Constitution, all tax bills must originate exclusively in the House of Representatives but the Senate may propose or concur with amendments. Here the tax bill originated from the House and hence there is no violation of the Constitution. The bill that originates from the House need not be the one finally approved. Hence the tax law is valid and constitutional.
II Atty. Braguda is wrong because even even if Mr. Mariano’s property is being used by a religious religious order for charitable purposes, the Constitutional exemption covers only real property taxes, not income taxes. Hence, the rental income Mr. Mariano receives as landlord of the property is subject to income tax and the BIR RDO may assess him if he was deficient in his payment of the corresponding income taxes on his rental income. On the other hand, Atty. Bulalo is also wrong because the constitutional exemption on donations pertains only to educational, not religious nor charitable purposes. However, should Mr. Mariano donate his property to the religious order to be used for the latter’s charitable purposes, even if the Constitution does not provide donor’s tax exemption for the such purpose, the NIRC provides exemption from the donor’s tax for such donations
III Gifts (d) and (e) are subject to tax. Regardless of the nature of his business and the illegal source of the gifts, both a re treated as donations inter vivos which are subject to donor’s tax. The following gifts, however, shall not be subject to donor’s tax: a)
The gift in favor of the LGU. Under the NIRC, gifts in favor of the National Government or a political subdivision thereof are exempt from the gift tax.
b)
The gift in favor of Home for the Aged. Under the NIRC, gifts in favor of a social welfare institution are exempt from gift tax provided not more than 30% of said gift shall be used by the donee for administration purposes. c)
Gift in favor of candidate Y. Under the Law on Gift Taxation, any contribution in cash to any candidate for campaign purposes, duly reported to the COMELEC, shall not be subject to gift tax. [Sec. 99(c), NIRC; Sec. 13, RA 7166]
IV (a) Yes, Wilma was justified in filing f iling the motion before the CTA. Suggested Answers Answers to Jurists Mock Mock Bar Examinations Examinations inTaxation Law. Law. © 2018 by Jurists Jurists Review Center Inc. Inc. Copying, dissemination, dissemination, storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc. is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the appropriate co mplaint with the Bar Confidant’s Office and IBP.
Page 1 of 5
Under the Law on Taxation, the CTA has the power to issue injunctive writs in cases falling within its jurisdiction. Here the CTA had jurisdiction over the c ase. Hence it can issue the writ of injunction and thus Wilma was justified in filing her motion. (b) No, a compromise of the tax liabilities is no longer possible. possible. Under the Law on Taxation, compromise may be granted upon either of two grounds namely, reasonable doubt on the validity of the assessment or financial incapacity. Here, compromise may not be based on the first ground since the CTA had already ruled for the validity of the assessment which decision became final when no appeal was taken thereon. Neither could the compromise be based on the second ground it appearing that Wilma, the appellant, had deposited in court the amount of tax liability in support of her application for injunction. Hence a compromise is no longer possible.
V I would grant the motion to dismiss filed by the taxpayer. The Supreme Court has held that the power of the CTA includes that of determining whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within the exclusive appellate appellate jurisdiction of the tax court. Here the order of the RTC granting the application for a writ of preliminary injunction is an interlocutory order and the exclusive appellate jurisdiction over local tax cases decided by the RTC is with the CTA. Hence it is the CTA not the CA which has jurisdiction over the case and thus the taxpayer’s motion to dismiss should be granted.
VI a) Dumping duties: Special duties imposed by the Secretary of Finance upon the recommendation of the Tariff Commission to combat under-priced imports when such imports would cause or likely cause injury to local industries. industries. b) Countervailing duties: Special duties imposed by the Secretary of Finance upon upon prior investigation and report of the Tariff Commission to offset an excise or inland tax upon articles of the same class manufactured at home or subsidies to foreign producers or manufacturers by their respective governments. c) Marking duties: Special duties imposed on articles not properly marked, collected by the Commissioner. Commissione r. The purpose of the surtax is to prevent possible deception of the consumers. d) Discriminatory Discrimina tory or retaliatory retaliator y duties: Special duties imposed by the President against goods of a foreign country which discriminates against Philippine commerce or Philippine goods. VII No, Mr. Francisco did not derive any income from the cancellation or condonation of his indebtedness. Under the Civil Code, remission or condonation of obligations is considered a donation. [Art. 1270, Civil Code] Suggested Answers Answers to Jurists Mock Mock Bar Examinations Examinations inTaxation Law. Law. © 2018 by Jurists Jurists Review Center Inc. Inc. Copying, dissemination, dissemination, storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc. is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the appropriate co mplaint with the Bar Confidant’s Office and IBP.
Page 2 of 5
Here there was no consideration for the condonation of the debt. Hence the same is considered as a gift or donation and should not be included in Mr. Francisco’s gross income.
VIII On the assumption that X is a resident citizen, a non-resident citizen, or a resident alien at the time of his death, all the properties shall form part of the gross estate of X subject to estate tax. Under the NIRC, gross estate refers to the value of all the properties wherever situated provided that in the case of a non-resident alien decedent, only those properties located in the Philippines Philippines shall form part of the gross estate. [Sec. 85, NIRC] If X were a non-resident alien at the time of his death and applying the same provision of the law , his house and lot in Bulacan and furniture and fixtures in the said house shall form part of the gross estate. The shares of stocks in a Philippine corporation shall also form part of his gross estate pursuant to the provisions of the NIRC, subject to reciprocity reciprocity rule. [Sec. 104, NIRC]
IX a) Under the NIRC, the amount of the proceeds of the life insurance is excluded in the gross income and shall be exempt from taxation taxation [Section 32 (B) (1), NIRC]. b) Under the NIRC, the amount amount of the 13 th month pay received by an employee which does not exceed P30,000 is excluded in the gross income and shall be exempt from taxation [Sec. 32 (B) (7) (e), NIRC] c) The stock dividends are not subject to tax. Stock dividends are not realized income. incom e. d) Bitoy’s free lodging is not taxable. Under the NIRC, tax on fringe benefits received by employees are payable by the employer. (Sec. 33 (A), NIRC] e) Under the law on income taxation, the meal allowance is considered a de minimis benefit and are non-taxable fringe benefits. They are tax exempt and exempt from the imposition of the fringe benefits tax. f) Under the law on income taxation, the uniform allowance is considered a de minimis benefit and are non-taxable fringe benefits. They are tax exempt and exempt from the imposition of the fringe benefits tax. X XYZ and Company B should properly reflect the transaction as income and expense, respectively, in the year 2018 and not 2017 despite the fact that the services were actually rendered in December 2017. XYZ realized the income when payment was made by Company B only in January, 2018, thus, for purposes of income time, it should be reflected in the year when the income was actually realized. On the part of Company B, it should claim the deduction only in 2018 as the same was actually paid only in January, 2018. For purposes of VAT, XYZ should reflect the output tax in January, 2018 and Company B should reflect the same as input tax also in January, 2018. Failure on the part of XYZ to reflect the same as income in 2018 constitutes evasion and failure on the part of Company B to claim the expense for 2018 shall result in non-deductibility of the expense.
Suggested Answers Answers to Jurists Mock Mock Bar Examinations Examinations inTaxation Law. Law. © 2018 by Jurists Jurists Review Center Inc. Inc. Copying, dissemination, dissemination, storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc. is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the appropriate co mplaint with the Bar Confidant’s Office and IBP.
Page 3 of 5
XI Yes, the underground tanks are considered as real property for purposes of real property taxation under the Local Government Code. The Supreme Court held that underground tanks of a gasoline station located on leased land are considered as real property under the Local Government Code since it is a familiar phenomenon to see things classified as real property for purposes of taxation which on general principles might be considered as personal property. Here what are involved are underground tanks used in a gasoline station. Hence the same are considered as real property for purposes of the real property tax. [Caltex Phils. Inc. v. CBOAA, 114 SCRA 296].
XII If I were the BOC Comm., I would impose tariff and customs duties on all of the importations. Under the Customs Modernization and Tariff Act, an OFW may bring balikbayan box free of TCD subject to the following conditions: a. Balikbayan Box shall contain personal and household effects only which are not of commercial quantity quantity or intended for barter or sale; b. Free Carrier At. (FCA) value shall not exceed P 150,000.00 per box; c. Privilege of bringing the box should be maximum of 3 times per calendar year. In these cases, the FCA value of goods exceeded the limit of P 150,000.00 in 2015 and for the year 2016, the goods, regardless of value, are intended for sale. For the year 2017, all the importations are subject to tariff and customs duties because each box, even if valued below FCA of P 150,000.00, contains goods intended for sale and that the importations for 2017 exceeded the limit of maximum of 3 times per calendar year.
XIII No, the BIR is not correct is arguing that the house and lot were transferred in contemplation of death. Under the NIRC, a bona fide sale for an adequate and full consideration in money or money’s worth is not deemed as a trans fer in contemplation of death. [Sec. 85(B)] Here the sale or transfer of the lot from Mr. Mortal to his son was for an adequate and full consideration. Hence the BIR is not correct in its argument.
XIV Yes, the BIR Commissioner should agree to obtain the bank information and provide the same to the IRS. Under the NIRC, the BIR Commissioner has the power to inquire into bank deposits upon request for tax information by a foreign tax authority under an international convention or agreement and to provide the information obtained to the foreign tax authority. [Sec. 6(f)]
Suggested Answers Answers to Jurists Mock Mock Bar Examinations Examinations inTaxation Law. Law. © 2018 by Jurists Jurists Review Center Inc. Inc. Copying, dissemination, dissemination, storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc. is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the appropriate co mplaint with the Bar Confidant’s Office and IBP.
Page 4 of 5
XV The grounds I may raise to question the imposition are the following: a) The power to tax may not be exercised by the mayor through the issuance of an executive order. Under the Local Government Code, the power to tax is legislative in nature and any imposition of a tax, fee or charge or the generation of revenue shall be exercised by the Sanggunian of the local government concerned through an appropriate ordinance. b) A municipality municipality may not levy a transfer tax on real property. property. Under the Local Government Code, a municipality may not levy a tax which is levied by a province. The transfer tax on realty is levied by provinces. provinc es. Hence a municipality may not levy the same. [Sec. 142 in in relation to Sec. 145, LGC].
XVI a) No, Makati City may not require require Mr. Mr. Fermin to pay his professional professional tax as a lawyer. Under the Law on Local Taxation, a professional has the option of paying his professional tax where he practices his profession or where he m aintains aintains his principal office. Here Mr. Fermin practices his legal profession in Pasig City where he has a branch office. Hence Mr. Fermin has the option of paying his professional tax as a lawyer in Pasig City and he cannot be compelled to pay it in Makati City.
b) No, Quezon City where Mr. Fermin resides may not go after him for the payment of his professional tax. Under the Law on Local Taxation, the situs of the professional tax is the city where the professional practices his profession or where he maintains his principal office in case he practices his profession in several places. Here Mr. Fermin neither practices his profession nor maintains a principal office in Quezon City. Hence Quezon City may not go after Mr. Fermin for the payment of his professional tax.
XVII Technical smuggling is distinguished from outright smuggling in that in technical smuggling, there is a semblance of compliance with the law on importation because there are documents submitted by the importer, while in outright smuggling, there are no documents submitted by the importer.
-oOo-
Suggested Answers Answers to Jurists Mock Mock Bar Examinations Examinations inTaxation Law. Law. © 2018 by Jurists Jurists Review Center Inc. Inc. Copying, dissemination, dissemination, storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc. is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the appropriate co mplaint with the Bar Confidant’s Office and IBP.
Page 5 of 5
