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I.

The new revenue ordinance is valid.

The law provides that the Congress has already delegated to the LGUs the power to create their
own sources of revenue in their respective territories and to apportion the same. That delegated
power however must strictly comply with both the equal protection and the due process clauses.

Here, the LGU already has an existing power to exercise its taxing powers and they were merely
updating the table to increase the tax rates and the tax bases. However, such ordinance before it
can be passed must be subject to a public hearing after notice has been given to the constituents
of the LGU.

Thus, the new revenue ordinance to update local business tax rates and bases is valid.

II.

The Bureau of Customs is correct.

The powers of the Bureau of Customs include the power to decide the means of disposal of
goods that have been stored and unclaimed by their owners for a long time inside the warehouse
subject to the notice requirements under the due process clause.

Here, the BOC was well within its right to create an effective means of disposal of unclaimed
container vans which may hamper or affect the exercise of its powers. However, they need to
give notice to the respective owners of the cargoes to give them ample time to claim their goods.
If the notice is unheeded, BOC may dispose of the container vans in the way they see fit.

Thus, the Bureau of Customs may issue a memorandum disposing of container vans subject to
the due process clause.

III.

I would advise the mayor otherwise.

The law provides for the difference between a toll and a tax. A toll is an exaction used to recover
the expenses of either the government or a private entity in constructing an infrastructure used by
the public. A tax is an exaction used to defray the expenses of the government and is an inherent
power of the same. The power of taxation is a broader power.
Essentially, what the mayor is asking for is a toll and not a tax. My answer will not change even
though the sanggunian passes a resolution supporting the contention of the mayor. It is within
their duties as city officials to maintain the upkeep of the government facilities used by the
public using the taxes already collected from the people in the exercise of their taxing powers.

Thus, the proposed action by the mayor is incorrect.

IV.

The gross estate of X is comprised of the following:

a. House and Lot in San Francisco, California


b. Furniture and Fixture in the house in California
c. Shares of Stocks in a Philippine Corporation
d. Shares of Stocks in an American Corporation

The gross estate of a decedent who is a non-resident citizen includes all real properties within
and without the Philippines; personal property wherever situated; and interests therein. However,
the law provides for allowable deductions such as the family home.

Here, assuming that the house and lot in Bulacan is the family home situated here in the
Philippines, it is excluded from the computation of the gross estate of the decedent including the
furniture and fixtures therein.

Thus, the gross estate of X includes everything except the family home in Bulacan and the
furniture and fixtures therein.

The date-of-death valuation refers to the computation of the value of property to be included in
the gross estate of the decedent . The basis for the computation of the value of such property uses
the day of the decedents death.

An example would be shares of stock where the value of the same is computed based on the
figures on the day of the death of the decedent.

VI.

(a)
XYZ is not required to file a protest on the PAN.

Under the law, the Preliminary Assessment Notice may or may not be protested. If it is protested,
the PAN may be changed by the BIR. If it is not protested, the PAN will remain as is and a Final
Letter of Demand or a Final Assessment Notice will be issued.

XYZ may opt not to reply to the PAN within 15 days but that would mean the assessment notice
will become final.

Thus, XYZ is not required to file a protest to the PAN.

(b)

The protest filed by XYZ on the FAN is valid.

The law provides that the protest to a Final Assessment Notice should be filed within 30 days
from the receipt of the FAN.

Here, XYZs motion for reinvestigation as a protest to the FAN was within the reglementary
period to file the same.

Thus, the protest on the FAN was valid.

(c)

If I were the CTA, I would dismiss the appeal.

The law provides for two ways where the taxpayer may appeal to the CTA Division. First is
when the CIR releases its decision which is adverse to the taxpayer within 180 days and second
is when the CIR fails to act on the said protest within the given time. In a motion for
reinvestigation, the CIR has 180 days to decide because they require the submission of
documents as opposed to a motion for reconsideration wherein they decide within 120 days only
without the requirement of submission of documents.

Here the appeal to the CTA by XYZ is premature because there is still remaining time for the
CIR to act on the motion for reinvestigation.

Thus, the appeal should be dismissed for being prematurely filed.


VII.

If I were the taxpayer, I would file a petition for mandamus to compel the LGU to follow the writ
of execution.

The LGUs non-compliance with the writ of execution issued by the RTC after the Supreme
Court has remanded the case to the RTC for execution is a non-compliance with the order of the
court.

XYZ Corporation might be able to claim its refund if the LGU follows the order of the court
after it has been compelled to by mandamus.

VIII.

Yes, the actuations of XYZ and Company B are valid.

The general principles of taxation provides for two accounting periods where the income may be
reflected. First is the Cash Method, where the income or the expenses is reflected upon actual
receipt or expenditure of the money is made. The other method is the Accrual Method, where the
income or the expense is constructively reflected upon the rendition of the services regardless if
the money was paid or not.

Here, depending on the method of accounting XYZ and Company B are using, the same will be
valid if they use the Cash Method.

Thus, the acts of XYZ and Company B are valid if they use the Cash Method of Accounting.

IX,

Not, the co-ownership is not taxable but the BIR is correct in issuing the assessment.

The law provides that for a co-ownership to be taxable as a partnership, it must be engaged in a
trade or business here in the Philippines. However, there are non-taxable co-ownerships such as
those made for the administration and preservation of a property owned in common. The co-
ownership may not be taxable; however the co-owners are liable individually for the tax on the
income of the property.

Here, there was no showing that X, Y, and Z used the mango plantation for trade and business.
Thus, X, Y, and Z did not create a partnership and is thus not taxable. However, X, Y and Z are
liable individually for the tax on the income of the mango plantation.

Thus, the co-ownership is not taxable and BIR is correct in issuing the deficiency assessment for
payment of income tax on the income earned by the plantation.
X.

The estate left by the decedent is not exempt from estate tax.

The law provides that properties of decedents that are Resident Aliens which are situated here in
the Philippines are subject to estate taxes. However, there are certain deductions that are allowed
such as the P1 Million standard deduction on the gross estate of the deceased.

The Canadian citizens bank deposits in Landbank are subject to estate taxes because they are
situated here in the Philippines.

Thus, the estate left by the decedent is not exempt from estate tax.

XI

(a)

Yes, the assessment was proper.

The law provides that any form of donation is taxable subject to exceptions. Such exceptions
include donations made to the government or to non-profit charitable institutions. A renunciation
by an heir made to another heir is a form of donation that is subject to donors taxes.

Thus, the renunciation of Cromwell of his 1/3 share in the estate of Pietrus is subject to donors
taxes.

Therefore, BIRs assessment of Donors taxes on Cromwell is correct.

(b)

Yes, my answer would be the same.

As provided by law, renunciation of a share in the estate of a deceased is subject to donors


taxes.

The renunciation of Cromwell of his share in the estate of their father is a donation made
regardless to which co-heir it was given to.

Thus, my answer is the same.


XII.

I would tell her that OFWs are not exempt from the payment of taxes.

As a rule, OFWs are taxable on their income derived from sources within the Philippines. Their
income derived from abroad is subject to income tax but not their income in the Philippines.

Here, the Register of Deeds is correct in not transferring the title of the house to her name due to
non payment of real property taxes on the same. Even if she is an OFW, she is still liable to pay
taxes on her property here in the Philippines. As for the bank account, the same is still subject to
withholding taxes because its situs is here in the Philippines and as such, it is taxable.

Thus, my cousins contention is not correct and that OFWs are still subject to taxes on their
income derived and property within the Philippines.

XIII.

(a)

The P100,000 received by Ambo on the insurance is subject to income tax.

The law provides that income derived from sources within the Philippines is subject to income
tax regardless of the source of income. In insurance, the premium is not taxable because it
represents capital. The fruits of that capital however is subject to income tax.

Thus, the P100,000 is considered as the income of the insurance and the P85,000 premium as the
capital. As such, the former is subject to income tax.

Thus, the P 100,000 is subject to income tax.

(b)

The same is not subject to income tax.

The income was not derived by the insured but by the beneficiary and as such it is subject to
estate taxes because the transfer was made to the beneficiary in consideration of the death of the
insured.
Here, the death of Ambo on the 18th year of the policy prompted the insurer to transfer the
proceeds of the insurance to the beneficiary. Such transfer was made in consideration of the
death of the insured and as such should be instead subject to estate taxes.

Thus, the P100,000 is not subject to income taxes but to estate taxes.

XIV.

I would tell them to use the profits for the expansion of the corporation.

As a rule, profits earned in excess of the outstanding capital stock should be distributed as
dividends. An exception to the rule is when the corporation plans to use its excess profits to
expand their business. Use of capital to expand a business is subject to lower tax rates as
compared to the taxes on dividend income.

Bamboo Corporation may opt to set up a branch somewhere else in the Philippines or it may
upgrade its equipment.

Thus, I would advise them to use the profits for the expansion of the corporation

XV.

I would make a compromise with the Commissioner of the Internal Revenue/

Non action of the BIR to the protest is a denial on the part of the taxpayers right to due process
and as such the prescriptive period of the period to assess the taxes has been suspended by such
inaction of the BIR.

As part of the next steps we have to take, we should be able to come up with a compromise
agreement with the Commissioner of the Internal Revenue to at least stall the payment of the
deficiency or at least lessen the tax liability.

Thus, I would strike up a compromise with the BIR to protect the interests of my client.

XVI.
The deductions allowable are the following: a) the fees paid to the Supreme Court to be able to
take the Bar and b) the fees paid to the bar review center to enroll in its pre-bar review classes.

Both (a) and (b) are deductible because they were used as means for self-improvement or to be
able to enter a professions and are thus not subject to income tax as they are not considered as
part of income.

Meanwhile, (c) is an incident of his profession and is a security for any malpractice that he may
commit in the course of his profession. Option (d) is not deductible because though it is illegal, it
is still subject to income tax.

Thus, a) the fees paid to the Supreme Court to be able to take the Bar and b) the fees paid to the
bar review center to enroll in its pre-bar review classes are deductible in Xs income tax return.

XVII.

CFC is correct.

Advertising expenses as a rule are considered ordinary business expenses because it aids in the
promotion of businesses to be able to earn more income. As such ordinary business expense for
the promotion of its products and services, it is deducted from gross income.

Here, the advertising expenses were incurred to protect the Chalap Ketchup from its competitors.
CFC needed to be more aggressive in promoting its products as theirs; otherwise, competitors
might easily usurp them.

Thus, advertising expenses are deductible from gross income.

XVIII.

The assessment is proper.

As a general rule, real property owned by the state and used for governmental functions are
exempt from taxation. However, if such government-owned properties are used by the
government in the course of their proprietary functions or if the land is leased to a taxable entity,
the land is subject to real property taxes.

Here, Mr. Llamado is a taxable entity leasing the property owned by the Municipality of
Panukulan, Quezon. The purpose of the lease was for the practice of his business and not for
governmental functions.

As such, the assessment of the BIR on the said property is correct.


XIX

The Iglesia Ni Kristo is not exempt from the payment of any of the taxes provided for.

Under the 1987 Constitution, religious organizations are exempt from real property taxes on
lands, buildings and improvements that are actually, directly and exclusively used for religious,
charitable and educational purposes. Jurisprudence also provides that the true test of exemption
of religious organizations from taxation is the actual use of the property and not its ownership.

Here, all the exemptions that Iglesia ni Kristo has been asking for cannot be granted because they
are all incidents of the creation of the Philippine Arena which is not considered to be for actual,
direct and exclusive use for religious, charitable and educational purposes.

Thus, the Iglesia Ni Kristo is not exempt from payment of the taxes.