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Tax Mock Answers Key
Tax Mock Answers Key
Tax Mock Answers Key
TOPIC:
and was able to redeem the property. Is PIDAP Bank liable to pay
capital gains tax as a result of the foreclosure sale? Explain.
Suggested Answer
NO. In a foreclosure of a real estate mortgage, the capital gains
tax accrues only after the lapse of the redemption period because
it is only then that there exists a transfer of property. Thus, if the
right to redeem the foreclosed property was exercised by the
mortgagor before expiration of the redemption period, as in the
case, the foreclosure is not a taxable event (RR No. 4-99;
Supreme Transliner, Inc. v. BPI Family Savings Bank, Inc.).
TAXABLE ONLY IF PERIOD OF REDEMPTION EXPIRED ALREADY
III
TOPIC:
Gina Lao owns real property in Makati City. On July 1, 2014, she
received a notice of assessment from the City Assessor, informing
her of a deficiency tax on her property. She wants to contest the
assessment.
(A) What are the administrative remedies available to
Madam X in order to contest the assessment and their respective
prescriptive periods?
(B)
May Madam X refuse to pay the deficiency tax
assessment during the pendency of her appeal?
Suggested Answer
IV
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V
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VI
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X Company was unable to file its income tax return for the taxable
year 2010. In 2012, the Bureau of Internal Revenue instituted an
action against X Company in court for the collection of unpaid
taxes for the taxable year 2010. X Company sought the dismissal
of the action on the ground that there was no assessment made
by the BIR prior to the institution of the court action. Decide.
Suggested Answer
The contention of X Company is untenable. Pursuant to Section
222 (a) of the NIRC:
In the case of a false or fraudulent return with intent to
evade tax or of failure to file a return, the tax may be
assessed, or a proceeding in court for the collection of
such tax may be filed without assessment, at any time
within ten (10) years after the discovery of the falsity, fraud
or omission: Provided, That in a fraud assessment which has
become final and executory, the fact of fraud shall be
judicially taken cognizance of in the civil or criminal action
for the collection thereof.(Emphasis supplied)
VII
TOPIC:
Pastillas Corp. was assessed by the BIR for deficiency tax relating
to the withholding taxes on compensation of its employees for the
taxable year 2014. The findings of the BIR revealed that during
2014, Pastillas Corp. gave 13 th month pay and other benefits to its
employees amounting to P60,000. However, Pastillas Corp.
excluded the entire amount in the computation of their
employees gross income and did not apply the P30,000 ceiling
for exclusion provided under Section 32 of the NIRC. Pastillas paid
the deficiency tax assessment.
The BIR again made an assessment for the taxable year 2015
against Pastillas Corp. for the same issue and using the same
legal basis. Is the BIR correct?
Suggested Answer
NO. The BIR is not correct. R.A. No. 10653, which became
effective in March 2015, amended the ceiling for the exclusion of
13th month pay and other benefits under Section 32(B)(7)(e)(iv),
NIRC, to wit:
Gross benefits received by officials and employees of public
and private entities: Provided, however, That the total
exclusion under this subparagraph shall not exceed eightytwo thousand pesos (P82,000) xxx (Emphasis
supplied)
VIII
TOPIC:
Suggested Answer
Pursuant to the NIRC, the following are the cases:
Section 228. Protesting of Assessment. - When the
Commissioner or his duly authorized representative finds
that proper taxes should be assessed, he shall first notify the
taxpayer of his findings: provided, however, That a
preassessment notice shall not be required in the following
cases:
(a) When the finding for any deficiency tax is the result
of mathematical error in the computation of the tax as
appearing on the face of the return; or
(b) When a discrepancy has been determined between
the tax withheld and the amount actually remitted by
the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax
credit of excess creditable withholding tax for a taxable
period was determined to have carried over and
automatically applied the same amount claimed against
the estimated tax liabilities for the taxable quarter or
quarters of the succeeding taxable year; or
(d) When the excise tax due on exciseable articles has
not been paid; or
(e) When the article locally purchased or imported by
an exempt person, such as, but not limited to, vehicles,
capital equipment, machineries and spare parts, has
been sold, traded or transferred to non-exempt persons.
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XII
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lawyer. The company is an exporter and, by virtue of its zerorated transactions, has excess input VAT amounting to
P20,000,000. The company also disclosed that it was assessed by
the BIR for delinquent taxes amounting to P1,500,000 the year
before and that it is planning to expand its operations abroad.
(A) They want to know how and when they can institute an
administrative and/or judicial claim for the refund of its
excess input VAT. What would be your advice?
(B) Would your advice be the same if, instead of claiming a
refund for excess input VAT, the claim for refund is based
on wrongful collection of taxes?
Suggested Answer
(A) Since Elizaga Happy Products, Inc. is a taxpayer who is
engaged in zero-rated sales, the provisions of Section 112
(a), NIRC would be applicable. The case of CIR v San
Roque Power Corporation shed light on the application of
the said provision:
Section 112(a) and (a) must be interpreted according to
its clear, plain, and unequivocal language. The
taxpayer can file his administrative claim for
refund or credit at anytime within the two year
prescriptive period. If he files his claim on the
last day of the two-year prescriptive period, his
claim is still filed on time. The Commissioner will
have 120 days from such filing to decide the
claim. If the Commissioner decides the claim on
the 120th day, or does not decide it on that day,
the taxpayer still has 30 days to file his judicial
claim with the CTA. This is not only the plain meaning
but also the only logical interpretation of Section 112(a)
and (c).
XIII
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XIV
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XV
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Don Rogelio, 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:
House and lot (family home)
in Pasig
P 800,000
1,500,000
2,000,000
500,000
1,000,000
as irrevocable beneficiary
Household
appliances
furnitures
and
1,000,000
100,000
100,000
P 250,000
500,000
Medical
illness
600,000
expenses
of
last
(C) When is the due date for filing and payment of the
applicable tax return and tax? Are these dates extendible?
If so, under what conditions or requirements?
Suggested Answer
500,000
500,000
300,000
800,000
Standard deduction
1,000,000
P3,300,00
Total Allowable Deduction
0
The claim against the cousin amounting to P100,000,
although included in the gross estate, cannot be claimed
as a deduction because the debtor is not yet declared
insolvent. The inherited property cannot give rise to a
vanishing deduction for want of sufficient factual basis.
(C) The filing of the return and payment of the tax is within
6 months from the date of death. The period to file the
return is extendible for a maximum of 30 days under
meritorious cases as maybe determined by the
Commissioner. The payment of the estate tax may also be
extended when the Commissioner finds that the payment
of the tax on the due date would impose undue hardship
upon the estate or any of their heirs. The period of
extension to pay shall not exceed five (5) years if the
estate is settled through the courts, or shall not exceed
two (2) years if settled extrajudicially. The Commissioner
may require the executor, or administrator, or the
beneficiary to furnish a bond in an amount not more than
double the amount of estate tax due (Sec. 91, NIRC).
XVI
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XVII
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XVIII
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XIX
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Question)
Suggested Answer
(A) YES. The capital gains tax is due to on the sale of a real
property classified as a capital asset (Section 24(D)(1),
NIRC)
The tax is 6% of the higher value between the selling
price (P600,000) and fair market value of the real property
(P900,000) or a tax in the amount of P54,000.
(B) NO. The real property sold, being in the nature of a
capital asset, is not subject to VAT. The sale is subject to
VAT only if the real property sold is held primarily for sale
to customers or held for lease in the ordinary course of
trade or business. A real property classified as a capital
asset does not include a real property held for sale or for
lease, hence, its sale is not subject to VAT (Section 39 and
Section 106, NIRC).
XX
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NO. The summary prepared by the CPA does not prove anything
unless the documents which were the basis of the summary are
submitted to the CTA and adduced in evidence. The invoices and
receipts must be presented because they are the only real and
direct evidence that would enable the Court to determine with
particular certainty the basis of the refund (CIR v Rio Tuba Nickel
Mining).
XXI
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XXII
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XXIII
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XXIV
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XXV
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(7) Dividends;
(8) Annuities;
(9) Prizes and winnings;
(10) Pensions; and
(11) Partner's distributive share from the net income of
the general professional partnership.
XXVI
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XXVII
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Suggested Answer
(A)
XXVIII
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XXIX
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XXIX
TOPIC:
Popoy donated a car, worth P1,000,000, to Basha, his sister-inlaw. He gave no other gift during the calendar year. How much is
the donors tax on Popoys donation?
Suggested Answer
The donors tax on Popoys donation is P300,000.
Basha, being a sister-in-law, is considered as a stranger to
Popoy. Section 99(B), NIRC states that:
(B) Tax Payable by Donor if Donee is a Stranger. - When the
donee or beneficiary is stranger, the tax payable by the
donor shall be thirty percent (30%) of the net gifts. For the
purpose of this tax, a 'stranger,' is a person who is not a:
(1) Brother, sister (whether by whole or half-blood),
spouse, ancestor and lineal descendant; or
(2) Relative by consanguinity in the collateral line within
the fourth degree of relationship.
The proper tax rate to be used is 30% and not the schedular rates
provided in Section 99(A), NIRC.
Yes. The BIR may collect the deficiency estate tax from all
or some or any of the heirs. However, the said heir may be
liable only up to the extent of his distributive share in the
estate. (BAR)