TAXATION BAR EXAMS 2013 ESSAY QUESTIONS
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I.
In its final adjustment return for the 2010 taxable year, ABC Corp.
had excess tax credits arising from its over-withholding of income
payments. It opted to carry over the excess tax credits to the following
year. Subsequently, ABC Corp. changed its mind and applied for a refund
of the excess tax credits.Will the claim for refund prosper? (6%)
II.
A group of philanthropists organized a non-stock, non-profit hospital
for charitable purposes to provide medical services to the poor. The
hospital also accepted paying patients although none of its income
accrued to any private individual; all income were plowed back for the
hospital’s use and not more than 30% of its funds were used for
administrative purposes.Is the hospital subject to tax on its income? If it is, at what rate? (6%)
III.
ABC Corporation is registered as a holding company and has an office
in the City of Makati. It has no actual business operations. It invested
in another company and its earnings are limited to dividends from this
investment, interests on its bank deposits, and foreign exchange gains
from its foreign currency account. The City of Makati assessed ABC
Corporation as a contractor or one that sells services for a fee. Is the
City of Makati correct? (6%)
IV.
Atty. Gambino is a partner in a general professional partnership. The
partnership computes its gross revenues, claims deductions allowed
under the Tax Code, and distributes the net income to the partners,
including Atty. Gambino, in accordance with its articles of partnership.In filing his own income tax return, Atty. Gambino claimed deductions that the partnership did not claim, such as purchase of law books, entertainment expenses, car insurance and car depreciation. The BIR disallowed the deductions.
Was the BIR correct? (6%)
V.
Mr. Agustin, 75 years old and suffering from an incurable 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. Agustin’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? (7%)
VI.
On October 15, 2005, ABC Corp. imported 1,000 kilos of steel ingots
and paid customs duties and VAT to the Bureau of Customs on the
importation. On February 17, 2009, the Bureau of Customs, citing
provisions of the Tariff and Customs Code on post-audit, investigated
and assessed ABC Corp. for deficiency customs duties and VAT.Is the Bureau of Customs correct? (7%)
VII.
XYZ Law Offices, a law partnership in the Philippines and a
VAT-registered taxpayer, received a query by e-mail from Gainsburg
Corporation, a corporation organized under the laws of Delaware, but the
e-mail came from California where Gainsburg has an office. Gainsburg
has no office in the Philippines and does no business in the
Philippines.XYZ Law Offices rendered its opinion on the query and billed Gainsburg US$1,000 for the opinion. Gainsburg remitted its payment through Citibank which converted the remitted US$1 ,000 to pesos and deposited the converted amount in the XYZ Law Offices account.
What are the tax implications of the payment to XYZ Law Offices in terms of VAT and income taxes? (7%)
VIII.
Mr. Amado leased a piece of land owned by the Municipality of
Pinagsabitan and built a warehouse on the property for his business
operations. The Municipal Assessor assessed Mr. Amado for real property
taxes on the land and the warehouse. Mr. Amado objected to the
assessment, contending that he should not be asked to pay realty taxes
on the land since it is municipal property.Was the assessment proper? (5%)
IX.
In the settlement of the estate of Mr. Barbera who died intestate,
his wife renounced her inheritance and her share of the conjugal
property in favor of their children. The BIR determined that there was a
taxable gift and thus assessed Mrs. Barbera as a donor.Was the BIR correct? (7%)
X.
In 2010, pursuant to a Letter of Authority (LA) issued by the
Regional Director, Mr. Abcede was assessed deficiency income taxes by
the BIR for the year 2009. He paid the deficiency. In 2011, Mr. Abcede
received another LA for the same year 2009, this time from the National
Investigation Division, on the ground that Mr. Abcede’s 2009 return was
fraudulent.Mr. Abcede contested the LA on the ground that he can only be investigated once in a taxable year. Decide. (7%)
XI.
In 2000, Mr. Belen bought a residential house and lot for P1,000,000.
He used the property as his and his family’s principal residence. It is
now year 2013 and he is thinking of selling the property to buy a new
one. He seeks your advice on how much income tax he would pay if he
sells the property. The total zonal value of the property isP5,000,000 and the fair market value per the tax declaration is P2,500,000. He intends to sell it for P6,000,000.What material considerations will you take into account in computing the income tax? Please explain the legal relevance of each of these considerations. (7%)
XII.
You are the retained tax counsel of ABC Corp. Your client informed
you that they have been directly approached with a proposal by a BIR
insider (i.e., a middle rank BIR official) on the tax matter they have
referred to you for handling. The BIR insider’s proposal is to settle
the matter by significantly reducing the assessment, but he will get 50%
of the savings arising from the reduced assessment.What tax, criminal and ethical considerations will you take into account in giving your advice? Explain the relevance of each of these considerations. (9%)