DLSU-FEU Tax Law Review 2009 - 2010

Assignment: Sessions 3 & 4 (June 16 & 18, 2009)

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Assignment for Session 3 is VI - VII.

Assignment for Session 4 is VIII - IX.

Assignment: Session 2 (June 2, 2009)

2009-06-01T14:01:00.001+08:00

Assignment is III - V of the outline. We'll start where we left off in Session 1 (II of the outline).

Final Exam

2008-08-22T08:25:00.002+08:00

Let me know ASAP of your preferred schedule. Except for Sept. 4, my 5:00 PM to 7:30 PM sked f0r next week and the week after next are still free.

Coverage is comprehensive. Excluded are XVI - XIX of the outline (first part) and Tariff and Customs Code of the Philippines.

Bar exam-type questions. Objective questions not exceeding 15% in weight are a possibility.

Closed-book exam.

Slides to be emailed.

Assignment: July 29, 2008 (Session 10)

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Read up already on estate and donor's tax, but we will finish first remedies of taxpayers.

Erratum in Suggested Answers to Midterm Exam

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There's a correction in the suggested answer to question IV(3)(a). The corrected suggested answer should read as follows: Dividends received by a resident foreign corporation from a domestic corporation are exempt inter-corporate dividends. Sorry for the confusion.

Assignment: July 22, 2008 (Session 9)

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Assignment is remedies of taxpayers.

Assignment: July 15, 2008 (Session 8)

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Assignment is Remedies of the Government. See attached outline. Cases and issuances to be emailed separately.

Midterm Exam Tip

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Do not overlook studying the Code provisions. Many of the questions could be answered if you have a good grasp of the Code provisions.

Midterm Exam: July 8, 2008

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Your midterm exam is scheduled on July 8, 2008, 5:00 - 7:30 PM. Please be at the exam room 10 - 15 minutes before 5PM because we will start on time.

As mentioned in class, the midterms will be bar exam-type questions (so study past bar exams to give you an idea). The coverage is Title II of the NIRC (Income Tax), excluding XVI to XIX of the Income Tax Outline. Objective questions (enumeration, true or false, multiple choice) (not exceeding a weight of 10%) are a possibility.

This is a closed-book exam (no notes, codal, annotations, etc. allowed).

I cannot over-emphasize the rule on academic honesty; any form of dishonesty is a serious offense and will be dealt with severely (so don’t even think about it).

Illustration of Excess MCIT Carry-Over

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See illustration of excess MCIT carry-over.

Assignment: July 1, 2008 (Session 6)

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Assignment is XIV to XV. Cases and issuances to follow.

Income Tax Rules for Domestic and Resident Foreign Corporations

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See attached income tax rules for domestic corporations and resident foreign corporations.

Assignment: June 24, 2008 (Session 5)

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Assignment is X to XIII.

Republic Act No. 9504

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President Arroyo signed into law today RA 9504 exempting minimum wage earners from income tax. Aside from the exemption of minimum wage earners, other provisions of the NIRC were amended as well, including the following:

Providing for a uniform personal exemption of P50,000 (up from P20,000, P25,000, and P32,000 for single individuals, heads of family, and married individuals, respectively)
Increasing the additional exemption for dependents from P8,000 per dependent to P25,000
Increasing the optional standard deduction of individuals subject to tax under Section 24 other than a nonresident alien from 10% to 40%
Allowing domestic corporations and resident foreign corporations to elect a standard deduction of 40% of gross income in lieu of itemized deductions under Section 34

Attached is Committee Report No. 53 (which is now RA 9504) so you could see the marked-up amendments to the NIRC.

Income Tax Matrix for Resident Citizens and Nonresident Aliens Engaged in a Phil. Trade or Business

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As discussed in Session 3, see income tax matrix for citizens and resident aliens (here) and nonresident aliens engaged in a Philippine trade or business (here).

Note that there are three general categories of income subject to income tax:

Category A: Other income subject to the graduated rates of 5% - 32% (consisting of compensation income, business and professional income, capital gains not subject to final tax, and passive income not subject to final tax). The computation of the income tax is made in the annual income tax return.

Category B: Passive income subject to final withholding tax. The tax is withheld at source and no longer reported in the annual income tax return.

Category C: Capital gains subject to capital gains tax. For sale of shares in a domestic company, the tax is due within 30 days from the date of sale; for sale of Philippine realty, the tax is withheld at source.

Illustration of "Substantial Change in Ownership" - NOLCO

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See slides . . .

Answers to Exercise 1

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Question 1: in 2006, Mr. A inherited a row of apartments with a fair market value of P1 million. In the same year, the row of apartments generated rentals for Mr. A in the amount of P100,000. Discuss the income tax implication, if any, of A's receipt of the apartments and the rentals.

Answer: A's receipt of the apartment is not taxable income while his receipt of the rentals should be included as part of his gross income for 2006. Section 32(B)(3) excludes from gross income "[t]he value of property acquired by gift, bequest, devise or descent . . . ." However, "income from such property . . . shall be included in gross income."

Question 2: the employer of Mr. B implemented a retrenchment program which resulted in B's separation from service. B received a separation pay of P200,000. At the time of his separation from service, B was 51 years old and had been in the service of his employer for nine years. Is the separation pay taxable income to B? Explain.

Answer: No. Under Section 32(B)(6)(b), "[a]ny amount received by an official or employee . . . from the employer as a consequence of separation of such official or employee from the service of the employer . . . for any cause beyond the control of the said official or employee," is excludable from gross income. B's retrenchment, being a cause of separation beyond his control, accordingly exempts his separation pay from income tax. The condition for exclusion under Section 32(B)(6)(a) -- that the retiring official or employee has been in the service of the same employer for at least 10 years and is not less than 50 years of age -- is not applicable to separation from service beyond the control of the separated official or employee.

Question 3: C Corp. insured the life of D, C Corp.'s president. C Corp. paid the premiums. The policy states that should Mr. D die, the proceeds of the insurance shall be paid to C. Corp. Are the premium payments deductible from C Corp.'s gross income? Are the premium payments taxable income in the hands of D? Would your answers be the same if the policy states that the proceeds shall be paid to D's spouse?

Answer: The premium payments are not deductible from C Corp.'s gross income. Under Section 36(A)(4), no deduction shall be allowed in respect to "[p]remiums paid on any life insurance policy covering the life of any officer or employee . . . when the taxpayer is directly or indirectly a beneficiary under such policy." Since C Corp. is directly a beneficiary under D's life insurance policy, premiums paid by C thereon are not deductible. The premium payments are not taxable income to D considering that he has no economic benefit whatsoever from such premium payments or the life insurance policy.

The tax implications would be different if the proceeds are payable to D's spouse. D being the president of C Corp., the premium payments would constitute taxable fringe benefit to D. Under Section 33(B)(10), taxable "fringe benefits" include "[l]ife or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows." The premium payments are gross income to D as "[c]ompensation for services in whatever form paid . . ." under Section 32(A)(1). D received as compensation for services something of economic benefit which he had not previously had, namely, the obligation of the insurance company to pay money in the future to his designated beneficiaries (i.e., D's spouse) on the terms stated in the policy. U.S. v. Drescher, 179 F.2d 863 (1950). Since the premiums are taxable fringe benefit to D, the same are deductible from C Corp.'s gross income under Section 34(A)(1)(a)(i) which allows a deduction for a "reasonable allowance for salaries, wages, and other forms of compensation for personal services actually rendered, including the grossed-up monetary value of fringe benefit furnished or granted by the employer to the employee . . . ."

Assignment: June 17, 2008 (Session 4)

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Assignment is VIII - IX. Materials to follow.

Exercise 1

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Please answer the following questions then email me your answers at thbello@baniquedlaw.com before Session 3 (subject line: Answers to Exercise 1). This exercise will not be graded but will count towards the 20% class participation. The point of this exercise is for you to analyze and apply Code provisions/jurisprudence to the given fact pattern. So try to do this on your own (it won't be graded anyway). Sa madaling sabi, wag kayo mag kopyahan!! Please lang!!

Question 1: in 2006, Mr. A inherited a row of apartments with a fair market value of P1 million. In the same year, the row of apartments generated rentals for Mr. A in the amount of P100,000. Discuss the income tax implication, if any, of A's receipt of the apartments and the rentals.

Question 2: the employer of Mr. B implemented a retrenchment program which resulted in B's separation from service. B received a separation pay of P200,000. At the time of his separation from service, B was 51 years old and had been in the service of his employer for nine years. Is the separation pay taxable income to B? Explain.

Question 3: C Corp. insured the life of D, C Corp.'s president. C Corp. paid the premiums. The policy states that should Mr. D die, the proceeds of the insurance shall be paid to C. Corp. Are the premium payments deductible from C Corp.'s gross income? Are the premium payments taxable income in the hands of D? Would your answers be the same if the policy states that the proceeds shall be paid to D's spouse?

Assignment: June 10, 2008 (Session 3)

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The assignment is VI to VII. Materials to follow.

Pahabol

2008-05-30T11:27:00.001+08:00

Please include Kleinwachter's Conundrum in the discussion in II(A)(1)(a).

Assignment: June 3, 2008 (Session 2)

2008-05-29T17:13:00.002+08:00

Assignment is III to V. Add Phil. Refining Co. v. CA (May 8, 1996) and Fernandez Hermanos, Inc. v. CIR (Sept. 30, 1969) under "bad debts." Materials to be emailed to Sam. Please let me know if we are meeting at 5PM.

Assignment: May 27, 2008 (Session 1)

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Assignment is I and II of the outline. Mainly lecture; volunteers for some of the cases are welcome.

Rules of the Game and Other Odds & Ends

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Course Objective - this course is primarily designed to provide the students with a fundamental understanding of income taxation of individuals and business entities; remedies of the government and the taxpayer under the National Internal Revenue Code (NIRC); estate and donor's taxes; VAT; local and real property taxation under the Local Government Code of 1991 (LGC) and general principles under the Tariff and Customs Code of the Philippines (TCCP).

Course Materials -

Code: NIRC (Rep. Act. No. 8424 or the “Tax Reform Act of 1997”), as amended; Book II, Titles I and II of the LGC (Rep. Act No. 7160); relevant provisions of the TCCP;
IRR: selected Rev. Regs. and other issuances;
Textbook/s: none required; suggested reference textbooks: Philippine Income Taxation by Victorino C. Mamalateo & Law of Basic Taxation in the Philippines by Benjamin B. Aban

Responsibility for Assigned Readings/Topics - each student is responsible for the assigned readings/topics, whether or not actually taken up in class.

Academic Honesty - the maintenance of academic integrity is the responsibility of each student. Any form of dishonesty, whether in recitation or in exams, is a serious offense and will be dealt with severely.

Grade Distribution - class participation, midterms, finals - 20/40/40.

Policies on Recitation -

None; recitation is voluntary
Lecture-type medium of instruction

Policies on Exams -

No make-up exam rule -

If a student is unable to take the midterm exam, he/she must produce documentary evidence establishing a valid excuse;
If a supported and valid excuse is found, the final exam will account for an increased percentage of the student’s final grade in lieu of the missed midterm exam;
If no such excuse is found, the missed midterm exam will be graded as whichever is lower of 70% or minus 5 percentage points from the lowest grade obtained by any student who took the midterm exam;
If a student is unable to take the final exam and the inability is excusable, the professor has the sole discretion to re-distribute the composition of the final grade or give a special exam;
If a student is unable to take the final exam and the inability is inexcusable, the student gets an automatic final grade of 70%.

No change in grade rule - Grades for the exams are determined by a careful process designed to ensure fairness. Therefore, grades will not be changed unless there has been a clerical or computation error.

Confermed or Confeermed?

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Actual (i.e., true to life) conversation overheard in an elevator in a Makati office building:

Jologs working girl 1: "Mare, ano ba diperensya ng confermed sa confeermed?"

Jologs working girl 2: "Gaga ka talaga?! Sus, d' mo alam?!" Pag 'confermed,' ibig sabihin nun, more or less, matutuloy yung meeting, gimik, etc. Pag 'confeermed,' ibig sabihin siguradong sigurado na na matutuloy . . ."

Ayus!

NB: Yung Session 12 and 13 natin confeermed na. So walang a-absent, ok?

Behind a Successful Woman . . .

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Behind a successful man is a woman
Behind a successful woman . . . is a loser

Ang Batang Sinungaling

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"Tandaan mo anak, ang batang sinungaling
ay 'di na tatangkad
uusli ang ipin
liliit ang binti at
tutubuan ng nunal sa mukha"

-- Diosdado Macapagal

Ako ang Iyong Trabaho

2007-12-26T11:08:00.000+08:00

Saw this motto-poster (largely unheeded, I guess) while waiting at the office of a BIR Regional Director . . .

AKO ANG IYONG TRABAHO

NOONG UNA, AKO AY HINAHANAP MO
SUBALIT NG AKO AY MATAGPUAN MO
ANO BA ITO? BAKIT AKO NA
ANG NAGHAHANAP SA IYO?

ANG PASOK SA OPISINA AY HINDI ALAS
NUEVE, HINDI ALAS DIYES, AT LALONG
HINDI ALAS DOSE

DAPAT MONG MALAMAN NA SA AKIN
NANGGAGALING ANG PAGKAIN MO, DAMIT
AT IBA PANG PANGANGAILANGAN MO.

PAANO NA ANG MGA MAHAL MO SA BUHAY
ANG MGA ANAK MO, AT ANG MGA
PANGANGAILANGAN MO
KUNG AKO AY MAWAWALA SA IYO?

SINO AKO?
AKO ANG IYONG TRABAHO SANA'Y MAHALIN MO AKO
BAGO KA MATANGGAL SA TRABAHO.