JURISTS BAR REVIEW CENTER
™
2018 TAXATION LAW MOCK BAR EXAMINATION
21 September 2018
5 pm to 9 pm
INSTRUCTIONS 1. This Questionnaire contains 5 pages. Check the number of pages and make sure it has the correct number of pages and their proper numbers. All the items have to be answered answered within four (4) hours. You hours. You may write write on the Questionnaire for notes relating to the questions. Read each question very carefully and write your answers in your Bar Examination Notebook in the same order the questions are posed. Write your answers only on the front of every sheet in your Notebook. If not sufficient, then start with the back page of the first sheet and thereafter. In your answers, use the numbering system in the questionnaire. 2. Answer the Essay questions legibly, clearly, and concisely. Start each number on a separate page. An answer to a sub-question sub-question under the same number may be written continuously on the same page and the immediately succeeding pages until completed. Your answer should demonstrate your ability to analyze the facts, apply the pertinent laws and jurisprudence, jurisprudence, and arrive at a sound or logical conclusion. Always support your answer with the pertinent laws, rules, jurisprudence, and the facts. A mere "Yes" or "No" answer without without any correspondin corresponding g explanation explanation or discussion discussion will not be given given full credit. Thus, always briefly but fully explain your answers although the question does not expressly ask for an explanation. Do not re-write or repeat the question in your Notebook. 3. Make sure you do not write your name or any extraneous note/s or distinctive marking/s on your Notebook that can serve as an identifying mark/s (such as names that are not in the given questions, prayers, or private notes to the Examiner). Writing, leaving, or making any distinguishing or identifying mark in the exam Notebook is considered cheating and can disqualify you. YOU CAN BRING HOME THE QUESTIONNARE
I
The House of Representatives Representativ es proposed a Tax Bill based on the proposal of the DOF. The Senate also submitted its Tax Tax Bill on the same subject matter. When the HR Bill was referred to the Senate, the same was not adopted and instead the Senate decided to pass its own version of the bill. Both Bills were then consolidated by the Bicameral Committee and submitted to the President who then signed the same into law. X now questions the validity of the approved tax law on the ground that it is violative of the constitution. Decide.
II Mr. Mariano, who inherited a well-preserved ancestral house in Pila, Laguna, accepted the offer of Sister Imaculada, Head of the Congregation of Blue Nuns for the latter to rent the house as Jurists Mock Bar Examinations inTaxation Law. © 2018 by Jurists Review Center Inc. Copying, dissemination, storage, use, modification, modificati on, uploading, and downloading without the express written consent of Jurists Review Center Inc. is strictly prohibited and shall be subjected to criminal prosecution and and administrative administrative charges, charges, including the appropriate appropriate complaint complaint with the Bar Bar Confidant’s Office and IBP. IB P.
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temporary refuge for destitute unwed mothers. Mr. Mariano religiously received rental payments from the congregation as the house and the congregation’s mission caught the attention and response from generous philanthropists all over the world. Mr. Mariano felt blessed for having agreed to have such use for the house until one day, he was dismayed to receive a notice from the BIR Laguna Regional District Office (RDO) that he was deficient in his payment of taxes. He immediately consulted with his friend, Atty. Braguda who advised him not to worry about the assessment because the source of his rental income was property used for religious purposes which the Constitution exempted from taxation. Unsure of the advice, he obtained a second opinion from another friend, Atty. Bulalo who told him that he should have donated the property to the religious order as that was what the Constitution exempts to avoid being taxed. Totally confused, Mr. Mariano decides to get your opinion about the two lawyers’ opinions. What would you say?
III In 2016, X, an operator of jueteng in Batangas, gave the following gifts inter vivos: a) P100,000.00 to the LGU for the construction of water tanks. b) P100,000.00 to Home for the Aged. c) P100,000.00 to Election Candidate Y. d) P 100,000.00 to his daughter D. e) P 100,000.00 to his friend F. Are the gifts subject to tax?
IV
Wilma protested a jeopardy assessment issued against her by the BIR. After receipt of an adverse decision, Wilma appealed to the CTA. Pending her appeal, the BIR served unto her warrants of distraint and notice of levy to enforce collection. In order to suspend the administrative collection process, Wilma moved before the CTA for injunction and at the same time deposited in court the amount sought to be collected. After due proceedings, the CTA ruled in favor of the BIR and rejected the claim of Wilma. Wilma no longer appealed the decision. Consequently, the decision became final and unappealable. (a) Was Wilma justified in filing the motion or petition before the CTA considering that under the NIRC, no court shall have authority to restrain the collection of taxes? (b) Is compromise of tax liabilities still possible? If so, on what ground?
V
In a local tax case initiated by a disgruntled taxpayer against the City of Manila, the RTC granted an application for a writ of preliminary injunction. The City of Manila sought for reconsideration but was denied by the court. Consequently, the City of Manila filed a special civil action for certiorari before the Court of Appeals (CA). The taxpayer moved for dismissal alleging that the CTA, not the CA, has jurisdiction over the case. The City of Manila countered that it is the CA which has jurisdiction since what was sought to be nullified was a mere interlocutory order issued by the RTC. Decide with reasons.
VI Under the Tariff and Customs Code, define the following: (a) (b)
Dumping duties. Countervailing duties.
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(c) (d)
Marking duties. Discriminatory duties.
VII Mr. Francisco borrowed P50,000 from his friend Mr. Gutierrez payable in one year without interest. When the loan became due, Mr. Francisco told Mr. Gutierrez that he was unable to pay because of business reverses. Mr. Gutierrez took pity on Mr. Francisco and condoned the loan. Mr. Francisco was solvent at the time he borrowed the P50,000 and at the time the loan was condoned. Did Mr. Francisco derive any income from the cancellation or condonation of his indebtedness? Explain.
VIII
X died in the United States of America. At the time of his death, he left the following assets: (a) (b) (c) (d) (e) (f)
House and Lot in San Francisco, California; House and Lot in Bulacan; Furniture and Fixture in the house in California; Furniture and Fixture in the house in Bulacan; Shares of Stocks in a Philippine Corporation; Shares of Stocks in an American Corporation;
What constitutes the gross estate of X? Provide for the legal basis.
IX Mr. Jose Bitoy, SM warehousing security supervisor, expects to receive the following on November 30, 2010: (a) P250,000 share as one of the beneficiaries of the life insurance proceeds of his late father; (b) P30,000 as advance payment of his 13 th month salary for CY 2010; (c) P5,000 worth of stock dividends from his PLDT shareholdings. Aside from his monthly salary of P30,000, he also receives the following monthly fringe benefits: (d) Free lodging within the warehouse premises, with a value of P2,500 a month to enable him to supervise security personnel at night; (e) Free meal allowance of P3,000 a month so long as he eats in the company’s canteen; and (f) Uniform allowance with an equivalent monthly value of P500. Briefly discuss the income tax treatment of all of the foregoing.
X
XYZ Inc. is a janitorial agency which rendered service to Company B. After closing its book for December 2017, Company B, on 02 January 2018 paid XYZ for the services rendered from December 15 to 31 December 2017. XYZ issued a receipt dated 02 January 2018 reflecting gross receipts plus VAT of 12% which Company B claimed as input VAT for December, 2017 and output Jurists Mock Bar Examinations inTaxation Law. © 2018 by Jurists Review Center Inc. Copying, 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 complaint with the Bar Confidant’s Office and IBP.
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VAT by XYZ for the month of December, 2017. Company B claimed the expense as deduction for 2017 and XYZ reflected the same as income for 2018 considering that the official receipt reflected the date 02 January 2018. Are the actuations of XYZ and Company B appropriate in declaring income and claiming deductions?
XI Under Article 415 of the Civil Code, in order for machinery and equipment to be considered real property, the pieces must be placed by the owner of the land, and, in addition, must tend to directly meet the needs of the industry or works carried by the owner. Oil companies install underground tanks in gasoline stations located on the land leased by the oil companies from the owners of the land where the gasoline stations are located. Are those underground tanks, which were not placed there by the owner of the land but which were instead placed there by the lessee of the land, considered as real property for purposes of real property taxation under the Local Government Code? Explain.
XII
In 2015, X, an OFW, went home to the Philippines two times bringing with him, 1 box each containing personal and household effects with value of P160,000.00 each. In 2016, he was extended three (3) paid-for-vacations in the Philippines. Similar to 2015, he again brought with him a box per vacation but this time containing goods for sale to his friends and relatives valued at P148,000.00. In 2017, he was extended four (4) paid-for-vacations in the Philippines. Similar to 2015 and 2016, he brought with him a box per vacation containing combined personal and household effects and those for sale to his friends and relatives valued at P148,000.00. If you were the Bureau of Customs Commissioner, which among the importations shall be subject to tariff and customs duties?
XIII
Mr. Mortal, 75 years old and suffering from a terminal disease, decided to sell for valuable and sufficient consideration a house and lot to his son. He died one year later. In the settlement of Mr. Mortal’s estate, the BIR argued that the house and lot were transferred in contemplation of death and should therefore form part of the gross estate for estate tax purposes. Is the BIR correct?
XIV
In 2011 the Commissioner of the United States Internal Revenue Service (IRS) requested in writing the Commissioner of Internal Revenue to get the information from a bank in the Philippines, regarding the deposits of a U.S. citizen residing in the Philippines, who is under examination by the officials of the U.S. IRS, pursuant to the US-Philippine Tax Treaty. Should the BIR Commissioner agree to obtain such information from the bank and provide the same to the IRS? Explain
XV
The municipal mayor of a certain municipality issued an executive order requiring the transferor of real property located within its territorial jurisdiction to pay a transfer tax equivalent to 1% of the value of such real property or consideration paid, if there be any, whichever is higher. What grounds may you raise in questioning the imposition? Jurists Mock Bar Examinations inTaxation Law. © 2018 by Jurists Review Center Inc. Copying, 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 complaint with the Bar Confidant’s Office and IBP.
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XVI
Mr. Fermin, a resident of Quezon City, is a CPA-Lawyer engaged in the practice of his two professions. He has his main office in Makati City and maintains a branch office in Pasig City. Mr. Fermin pays his professional tax as a CPA in Makati City and his professional tax as a lawyer in Pasig City. (a) May Makati City, where he has his main office, require him to pay his professional tax as a lawyer? Explain. (b) May Quezon City, where he has his residence and where he also practices his two professions, go after him for the payment of his professional tax as a CPA and a lawyer?
XVII Distinguish technical smuggling from outright smuggling.
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Jurists Mock Bar Examinations inTaxation Law. © 2018 by Jurists Review Center Inc. Copying, 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 complaint with the Bar Confidant’s Office and IBP.
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