This questionnaire is in TWO (2) PARTS: Part I with nine (9) questions (numbered I to IX), contained in five (5) pages; and Part II with nine (9) questions (numbered X to XVIII), contained in six (6) pages, for a total number of eleven (11) pages.
Write your answers to Part I and Part II in the corresponding portions indicated in the booklet.
Begin your answer to each numbered question on a separate page; an answer to a sub-question/s under the same number may be written continuously on the same page and succeeding pages until completed.
Answer the questions directly and concisely. Do not repeat the question. Write legibly.
HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE
CONCHITA CARPIO MORALES
2010 BAR EXAMINATIONS COMMITTEE
PLEASE CHECK THAT THIS SET CONTAINS ELEVEN (11) PAGES (INCLUDING THIS PAGE).
WARNING: NOT FOR SALE OR UNAUTHORIZED USE
True or False.
Mirador, Inc., a domestic corporation, filed its Annual Income Tax Return for its taxable year 2008 on April 15, 2009. In the Return, it reflected an income tax overpayment of P1,000,000.00 and indicated its choice to carry-over the overpayment as an automatic tax credit against its income tax liabilities in subsequent years.
On April 15, 2010, it filed its Annual Income Tax Return for its taxable year 2009 reflecting a taxable loss and an income tax overpayment for the current year 2009 in the amount of P500,000.00 and its income tax overpayment for the prior year 2008 of P1,000,000.00.
In its 2009 Return, the corporation indicated its option to claim for refund the total income tax overpayment of P1,500,000.00
Choose which of the following statements is correct.
On March 10, 2010, Continental, Inc. received a preliminary assessment notice (PAN) dated March 1, 2010 issued by the Commissioner of Internal Revenue (CIR) for deficiency income tax for its taxable year 2008. It failed to protest the PAN. The CIR thereupon issued a final assessment notice (FAN) with letter of demand on April 30, 2010. The FAN was received by the corporation on May 10, 2010, following which or on May 25, 2010, it filed its protest against it.
The CIR denied the protest on the ground that the assessment had already become final and executory, the corporation having failed to protest the PAN.
Is the CIR correct? Explain. (5%)
Does the Court of Appeals have the power to review compromise agreements forged by the Commissioner of Internal Revenue and a taxpayer? Explain. (5%)
Based on the Affidavit of the Commissioner of Internal Revenue (CIR), an Information for failure to file income tax return under Section 255 of the National Internal Revenue Code (NIRC) was filed by the Department of Justice (DOJ) with the Manila Regional Trial Court (RTC) against XX, a Manila resident.
XX moved to quash the Information on the ground that the RTC has no jurisdiction in view of the absence of a formal deficiency tax assessment issued by the CIR.
Is a prior assessment necessary before an Information for violation of Section 255 of the NIRC could be filed in court? Explain. (4%)
What are the conditions that must be complied with before the Court of Tax Appeals may suspend the collection of national internal revenue taxes? (3%)
What is the rule on appeal from decisions of the Collector of Customs in protest and seizure cases? When is the decision of the Collector of Customs appealable to the Court of Tax Appeals? Explain. (5%)
On May 15, 2009, La Manga Trading Corporation received a deficiency business tax assessment of P1,500,000.00 from the Pasay City Treasurer. On June 30, 2009, the corporation contested the assessment by filing a written protest with the City Treasurer.
On October 10, 2009, the corporation received a collection letter from the City Treasurer, drawing it to file on October 25, 2009 an appeal against the assessment before the Pasay Regional Trial Court (RTC).
True or False. (1% each)
Are the following transactions subject to VAT? If yes, what is the applicable rate for each transaction. State the relevant authority/ies for your answer.
Ferremaro, Inc., a manufacturer of handcrafted shoes, maintains its principal office in Cubao, Quezon City. It has branches/sales offices in Cebu and Davao. Its factory is located in Marikina City where most of its workers live. Its principal office in Quezon City is also a sales office.
Sales of finished products for calendar year 2009 in the amount of P10 million were made at the following locations:
Where should the applicable local taxes on the shoes be paid? Explain. (3%)
XYZ Shipping Corporation is a branch of an international shipping line with voyages between Manila and the West Coast of the U.S. The companys vessels load and unload cargoes at the Port of Manila, albeit it does not have a branch or sales office in Manila. All the bills of lading and invoices are issued by the branch office in Makati which is also the companys principal office.
The City of Manila enacted an ordinance levying a 2% tax on gross receipts of shipping lines using the Port of Manila.
Can the City Government of Manila legally impose said levy on the corporation? Explain. (3%)
A inherited a two-storey building in Makati from his father, a real estate broker in the 60s. A group of Tibetan monks approached A and offered to lease the building in order to use it as a venue for their Buddhist rituals and ceremonies. A accepted the rental of P1 million for the whole year.
The following year, the City Assessor issued an assessment against A for non-payment of real property taxes.
Is the assessor justified in assessing As deficiency real property taxes? Explain. (3%)
Don Sebastian, single but head of the family, Filipino, and resident of Pasig City, died intestate on November 15, 2009. He left the following properties and interests:
The compulsory heirs of Don Sebastian approach you and seek your assistance in the settlement of his estate for which they have agreed to the above-stated professional fees. Specifically, they request you to explain and discuss with them the following questions. You oblige:
A is a travelling salesman working full time for Nu Skin Products. He receives a monthly salary plus 3% commission on his sales in a Southern province where he is based. He regularly uses his own car to maximize his visits even to far flung areas. One fine day a group of militants seized his car. He was notified the following day by the police that the marines and the militants had a bloody encounter and his car was completely destroyed after a grenade hit it.
A wants to file a claim for casualty loss. Explain the legal basis of your tax advice. (3%)
In 2009, Caruso, a resident Filipino citizen, received dividend income from a U.S.-based corporation which owns a chain of Filipino restaurants in the West Coast, U.S.A. The dividend remitted to Caruso is subject to U.S. withholding tax with respect to a non-resident alien like Caruso.
ABC, a domestic corporation, entered into a software license agreement with XYZ, a non-resident foreign corporation based in the U.S. Under the agreement which the parties forged in the U.S., XYZ granted ABC the right to use a computer system program and to avail of technical know-how relative to such program. In consideration for such rights, ABC agreed to pay 5% of the revenues it receives from customers who will use and apply the program in the Philippines.
Discuss the tax implication of the transaction. (5%)