CRUZ, JOHN CHLOE D.

PROBLEM NUMBER 1
In March 2020, the local government of Gen. Trias issued an ordinance imposing a
tax on the sale of ethyl alcohol within the City. A, a manufacturer and distributor
of ethyl alcohol, filed a case before the RTC arguing that the ordinance is
unconstitutional for being discriminatory. The RTC ruled in favor of the City and
A decided not to appeal the decision. Later, the Congress passed a law imposing
tax on the sale of ethyl alcohol. A again filed a case before the RTC questioning
the constitutionality of the said law. The City government of Gen. Trias likewise
filed a case saying that the Congress can no longer impose this tax as it is already
imposing the same.
1. If you were the lawyer for A, what arguments will you use to defend your case?
(5 points)
2. If you were the lawyer for the national government, what arguments will you
use to defend your case? (5 points)
3. If you were the lawyer for the local government, what arguments will you use to
defend your case? (5 points)

1. If I am the lawyer for A, I will argue that this is a classic case of direct
double taxation. It is a kind of double taxation that is prohibited for violation
of the equal protection clause of the Constitution. In this case, the same
subject matter is taxed twice. Both taxes are levied for the same purpose. It
is imposed within the same jurisdiction, during the same taxing period, and
covering the same kind and character of taxation.

2. If I am the lawyer for the national government, I will argue that there is no
direct double taxation in this case. Congress prevents LGUs from imposing
taxes which are already imposed by the National Government. This
limitation is called the pre-emption rule. Indirect double taxation is allowed
as long as it does not violate the equal protection clause of the Constitution.
 3. If I am the lawyer for the Local Government, I will argue that the Local
Government Code grants the City of General Trias the power to levy taxes
on ethyl alcohol. I will argue that there is no direct double taxation in this
case because the requisites for direct double taxation is not met. The tax
imposed was for a different purpose and is being levied by different
jurisdictions. Tax law should not violate the equal protection clause of the
Constitution. (Ormoc Sugar Co. v Treasurer of Ormoc)

PROBLEM NUMBER 2
Max is an English international artist who won 1200 Grammy Awards and 500
Oscar Awards. She did a concert in the Philippines where ticket sales soared to a
total of P1B. She engaged the services of QT &Co., an international accounting
firm holding office in the Philippines to handle her accounts and taxes for this
particular engagement. QT advised Max to invest her earnings for this concert in
the purchase of shares of stock of XYZ Corporation, a domestic corporation whose
shares are listed and traded with the Philippine Stock Exchange. Max followed the
advise and bought P500million worth of XYZ shares. While she was a stockholder,
XYZ declared and distributed dividends in the amount of P1.00 per share. Later,
Max decided to sell half of her investment, for which she paid P250million in the
amount of P350million. The BIR, getting wind of Max's earnings imposed taxes on
the same. QT argues that Max is entitled to deductions pertaining to her plane
fares, hotel accommodations, and the salaries of her personal assistants.
1. What are the tax consequences of Max's earnings for her Philippine concert? (10
points)
2. What are the tax consequences of Max's earnings for the dividends declared and
distributed by XYZ? (10points)
3. What are the tax consequences of Max's earnings for the sale of XYZ shares for
P350million? (10points)
4. Is the BIR correct? (10 points)
5. Is QT correct in claiming the deductions? (10 points)
 1. As regards her earnings for her Philippine concert, Max is a nonresident
alien not engaged in trade or business within the Philippines. A nonresident
alien individual who shall come to the Philippines and stay for a period of
more than180 days in a year shall be deemed a nonresident alien doing
business in the Philippines. Any income derived from sources within the
Philippines shall be taxed an amount of 25% of such income.

2. As regards Max’s earnings for the dividends declared and distributed by

XYZ, the tax code provides that a nonresident alien not engaged in trade or
business in the Philippines shall be taxed an amount of 20% of the amount.

3. As regards Max’s earnings for the sale of XYZ shares for P350 million, the
Code provides that, dividends from a domestic corporation shall be subject
to an income tax of twenty percent (20%) on the total amount thereof.

4. Yes, the BIR is correct. Max’s income is taxable in our jurisdiction for it is
income derived from sources within the Philippines. As such, the BIR has
the jurisdiction to impose taxes on the same.

5. No, QT’s argument in claiming deductions are incorrect. Max is not entitled
to deductions pertaining to her plane fares, hotel accommodations, and the
salaries of her personal assistants. A nonresident alien not engaged in trade
or business in the Philippines cannot avail of any deductions since their
gross income from sources within the Philippines is subject to a final tax rate
prescribed by law.

PROBLEM NUMBER 3
Leymar is a philanthropist who has dedicated his entire life giving away designer
shoes to the less fortunate. For the year 2020, he received income from (a) his
various businesses as a stockholder, director, or officer thereof; (b) his salaries as
an employee of Leymar Construction, Corp.; (c) his profit from buying and selling
real estate; (d) his profit from buying and selling shares of stock; (e) his winnings
from the Tiktok Challenge launched by "Musta Atty;" (f) jueteng winnings; and (g)
the sale of his building located in Makati City.
Identify:
(a) whether it is income; (b) whether it is taxable; (c) type of tax

1. various businesses as a stockholder, director, or officer thereof (5 points)

2. salaries as an employee of Leymar Construction, Corp (5 points)
3. profit from buying and selling real estate (5 points)
4. buying and selling shares of stock (5 points)
5. winnings from Musta Atty (5 points)
6. jueteng winnings (5 points)
7. sale of his building (5 points)

1.
a. His income from his various business as a stockholder, director, and
officer thereof is income for it increases his net worth. It is income derived
as salary, wages, and other compensation.
b. It is taxable.
c. It is subject to Income Tax at the rate prescribed by law.

2.
a. His income from his salaries as an employee of Leymar Construction,
Corp is income for it increases his net worth. It is income derived as salary,
wages, and other compensation.
b. It is taxable.
c. It is subject to Income Tax at the rate prescribed by law.
3.
a. His profit from buying and selling real estate is income for it increases his
net worth. It is income derived from sale of real property.
b. It is taxable.
c. It is subject to capital gains tax at the rate provided for by law.
 4.
a. His profit from buying and selling shares of stock is income for it
increases his net worth. It is income derived from sale of stocks.
b. It is taxable.
c. It is subject to capital gains tax at the rate provided for by law.

5.
a. His winnings from Musta Atty. is income for it increases his net worth. It
is income derived from prizes and winnings.
b. It is tax exempt up to P10,000.
c. It is subject to income tax at the rate provided for by law.

6.
a. His kubra from jueteng is an illegal source of income.
b. It is not taxable.
c. Income derive from jueteng is punishable by law.

7.
a. His profit from the sale of his building is income for it increases his net
worth. It is income derived from sale of real property.
b. It is taxable.
c. It is subject to capital gains tax at the rate provided for by law.

BONUS:
1. Enumerate the inclusions to a taxpayer's gross income (10 points)
a. Compensation
b. Annuities
c. Rents
d. Dividends
e. Gains from dealing with properties
f. Royalties
g. Interests
h. Gross Income from the exercise of profession, trade, or business
i. Prizes and winnings
j. Pensions
k. Partner’s share in the net income of the general professional partnership.

2. Enumerate the exclusions from a taxpayer's gross income (10 points)

a. Life Insurance
b. Amount Received by Insured as Return of Premium
c. Gifts, Bequests, and Devises
d. Compensation for Injuries or Sickness
e. Income Exempt under Treaty
f. Retirement Benefits, Pensions, Gratuities, etc
g. Miscellaneous Items.
Income Derived by Foreign Government.
Income Derived by the Government or its Political Subdivisions.
Prizes and Awards
Prizes and Awards in sports Competition
13th Month Pay and Other Benefits
GSIS, SSS, Medicare and Other Contributions
Gains from the Sale of Bonds, Debentures or other Certificate of
Indebtedness
Gains from Redemption of Shares in Mutual Fund.

3. Enumerate the allowable itemized deductions to a taxpayer's gross

income (10 points)
a. Business Expenses
b. Interests
c. Taxes
d. Losses
e. Bad Debts
f. Depreciation
g. Depletion
h. Charitable Contributions
i. Research and Development
j. Pension Trust Contribution