1.

An individual, who is a real estate dealer, sold a residential lot in Quezon City at a
gain of P100,000.00 (selling price of P900,000.00 and cost is P800,00.00). How shall
he or she be taxed? ( 5 pts)

2. a. JR is a mixed – income earner. He comes to you to seek legal advice on his income
taxes. If JR has a taxable compensation income of Php 1,410,000.00 and Gross Sales
of 2,400,000.00 and other Non-operating income of 100,000.00, what income tax
options are available to JR? Explain. ( 10 pts)

b. If JR purely earns compensation income, will your answer in letter (a) be the
same? (5 pts)

3. Mr. Jose Castillo is a resident Filipino citizen. He purchased a parcel of land in

Makati City in 1970 at a consideration of P1 Million. In 2011, the land, which
remained undeveloped and idle had a fair market value of P20 Million. Mr. Antonio
Ayala, another Filipino citizen, is very much interested in the property and he
offered to buy the same for P20 Million. The Assessor of Makati City re-assessed in
2011 the property at P10 Million.

a. Is Mr. Castillo liable for income tax in 2011 based on the offer to buy by Mr.
Ayala? Explain your answer. ( 5pts)

b. Should Mr. Castillo agree to sell the land to Mr. Ayala in 2012 for P20 Million,
subject to the condition as stated in the Deed of Sale that the buyer shall assume
the capital gains tax thereon, how much tax is due on the transaction? (5 pts)

c. Should Mr. Castillo agree to sell the land to Mr. Ayala, what are the conditions to
exempt the transaction from the Capital Gains Tax? (5 pts)

4. In 2007, spouses Renato and Judy Garcia opened peso and dollar deposits at the
Philippine branch of the Hong Kong Bank in Manila. Renato is an overseas worker in
Hong Kong while Judy lives and works in Manila. During the year, the bank paid
interest income of P10,000 on the peso deposit and US$1,000 on the dollar deposit.
The bank withheld final income tax equivalent to 20% of the entire interest income
and remitted the same to the BIR.

Are the interest incomes on the bank deposits of spouses Renato and Judy Garcia
subject to income tax? Explain. (5 pts)

5. 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.

What will be your advice to Caruso to lessen the impact of double taxation having
paid foreign taxes from his dividends earnings from US? (5 pts)

6. Ernesto, a Filipino Citizen and a practicing lawyer, filed his income tax return for
2007 claiming optional standard deductions. Realizing that he has enough
documents to substantiate his profession – connected expenses, he now plans to file
an amended income tax return for 2007, in order to claim itemized deductions, since
no audit has been previously filed.

a. Will Ernesto be allowed to amend his return? Why or why not? (5 pts)
b. What is the Optional Standard Deduction? (5 pts)
c. What is the concept of Net Operating Loss Carry – Over? (5 pts)

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