I

NCOMETAXATION6THEdi
ti
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A&ROXAS) 3
SUGGESTEDANSWERS
Chapt
er2:
TaxAdmi
nist
rat
ion

CHAPTER2
TAXADMI
NISTRATI
ON
Pr
oblem 2–1TRUEORFALSE
1. True
2. False–nott heBI R,buttheDepar t
mentofFi nance
3. False–t heBIRisr esponsibl
et ocollectnati
onal t
axesonl y
.
4. False–Ther eviewshal lbemadebyt heCour tofJustice.
5. True
6. True
7. False–TheSecr etaryofJusticeandt heCour tsalsointer
pret
stheprov
isi
onsoftheTaxCode.
8. False–t hefactthattaxesar eself
-assessingt heBIRassessmentisnecessar
ytoensur ethe
r
eli
abi
l
ityoftheITR.
9. False–t heBIRort heGov ernmenti snotallowedbyl awt oappealt
otheCTA.(Act
ingCol
l
ect
orof
cust
omsvs.Cour
tofAppeal
s,Oct
.31,
1957)
10.True
11.False–Appeal t
otheSCshallbemadewi t
hin15daysfr
om t
herecei
ptoft
hedecisi
onoft heCTA.
12.False–theCIRcanconductajeopar
dyassessmentwhentherear
enoaccounti
ngrecords.
13.True
14.False–thetaxpayerneedst
owaivefi
rsthi
srightont
hesecr
ecyofbankdeposi
tsbefor
eBI Rcan
i
nquirei
ntohisbankdeposit
s.
15.True

Pr
oblem 2–2TRUEORFALSE
1. False–t heremustbeaLet terofAut hor
it
y.
2. False–t hesuppor ti
ngdocument smustbesubmi tt
edtotheBI Rwithi
n60day sf
rom t
hedat
ea
pr
otestisfi
led.
3. True
4. True
5. False–dest raintasat axcoll
ecti
onmet hodisappli
cabl
eonl ytopersonal
proper
ty.
6. False–cr i
mi nalviol
ationsal
readyfil
edincourtarenotsubjecttocompromise.
7. True
8. False,coll
ecti
onmustbewi t
hin5y ears
9. True
10.False-r
edempt ionperiodiswithi
n1y earfrom dat
eofauctionsale.
11.True
12.True

Pr
oblem 2–3TRUEORFALSE
1. Fal se–therei
snoneedt opayadditi
onalregi
strati
onfeef ort
ransferofbusi
nessregi
str
ati
on.
2. Tr ue
3. Fal se–theini
tialbondrequi
redformanuf act
urersandimpor t
ersofar t
icl
essubj
ecttoexci
setaxis
P100,000.
4. Fal se–inf
ormer ’
srewardissubjectto10%f i
nalwithhol
dingtax.
5. Tr ue
6. Tr ue
7. Tr ue
8. Tr ue
9. Fal se–Seizur
e
10.Fal se–Forfei
ture
11.Fal se–notall
owedbecauset hesecondcousiniswi t
hinthe6thdegreeofrel
ati
vebyconsanguini
ty.
12.Fal se–coll
ectiontaxcasesfil
edincourtsaresubjecttocompr omise.
13.Tr ue
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Chapt
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TaxAdmi
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rat
ion

Probl
em 2–4 Probl
em 2–5 Probl
em 2–6
1.C 1.B 1.B
2.B 2.A 2.A
3.B 3.D 3.A
4.D 4.C 4.B
5.C 5.D 5.D
6.C 6.D 6.C
7.B 7.C 7.B
8.B 8.C 8.A
9.C 9.A 9.C
10.D 10.A 10.A
11.A 11.A
12.D 12.A

Pr
obl
em 2–7

CaseA: April
15, 2014-Ther
etur
n,stat
ementordecl
arat
ioncanbemodif
ied,
changedor
amendedfr
om wit
hinthreey ear
sfr
om t
hedateoffi
l
ingaslongasnotaxinv
est
igat
ionhasbeenser
vedt
o
thet
axpay
er.(
Sec.6(A),NI
RC)

CaseB: Oct
ober20,2015-Ifthetaxdef
ici
encyisduet
osi
mplenegl ect ,thepr escr
ipt
iveper
iodof
taxassessmenti
swit
hin3yearsstar
tingfr
om thedateoffi
li
ngt
her
etur
n(Sec.203,NIRC),orit
samendment .

CaseC: Apri
l15,2025-IftheITRisfraudul
entornotaxretur nwasf il
ed,
thet
axmaybeassessed,
oraproceedi
ngi
ncour tf
ort hecol
lecti
onofsucht axmaybefi
ledwi thoutassessmentatanyt i
mewi thi
n
ten(
10)yearsaf
terthediscover
yoft hefal
sit
y,fr
audoromissi
on.(Sec.222(a),NIRC)

CaseD: Apri
l15,2022-IftheITRisfraudul
entornotaxretur nwasf il
ed,
thet
axmaybeassessed,
oraproceedi
ngi
ncour tf
ort hecol
lecti
onofsucht axmaybefi
ledwi thoutassessmentatanyt i
mewi thi
n
ten(
10)yearsaf
terthediscover
yoft hefal
sit
y,fr
audoromissi
on.(Sec.222(a),NIRC)

CaseE: Noneedtoappeal
.Theprescri
bedperi
odoff i
l
ingf
ort
heref
undisal
readyexpi
red.The
fi
l
ingofr
efundshoul
dhavebeenmadewithi
nt woyear
saf t
erthepay
mentoft
axorpenalt
y.I
twasf i
led
wit
hin2year
s,onemonth,
and5daysaft
erthedateoferroneouspay
ment,
hence,
notappeal
ableany mor
e.

CaseF: May5,2013.Thefi
li
ngofrefundwasappropr
iatel
ymadewi t
hint
he2yearprescr
ibed
peri
od.Thedenialwasreceiv
edonApri
l5,
2013.Thefi
l
ingofappealtoCTAshoul
dbemadewit
hin30day s
fr
om therecei
ptofdeni
alfrom t
heBI
R.

CaseG: August2, 2017.Thedat

eofgrantforref
undwasr ecei
vedonAugust1,2012.Theref
und
check( dat
edJuly15,2012)shouldbeencashedwithin5yearsf
rom thedatethegr
antforref
undwas
del
ivered(August1,2012).Thecheckshouldbeencashedfrom August1,2012toAugust1,2017.I
twi
llbe
for
feit
edonAugust2, 2017.

CaseH: July31,
2017.Fortaxcredi
t,t
hefiv
ey earpr
escr
ipt
iveperi
odshoul
dstartf
rom t
hedat
eof
i
ssuance.I
nthi
scase,t
hedateofissuanceshouldbethedateoft
axcreditcer
ti
fi
cat
e.Theexpi
rydat
ewoul
d
ther
efor
estar
tonJuly31,
2017.

CaseI: August20,2011.I
ftheBIRhasnor esponseaftert
hesubmissi
onofsuppor
ti
ng
document
stoser
veasev i
dencefortheprotest
,thel
astdayt oappealt
otheCTAshouldbemadewi
thi
n30
daysfr
om t
hel
apseofthe180dayper iodfr
om thesubmissionofthesuppor
ti
ngdocuments.
Comput
ati
onofdays:
Aft
erJanuar
y22,2011 Day
s
I
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TaxAdmi
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ion

January 9
February 28
March 31
April 30
May 31
June 30
July 21
TotalnumberofdaysasofJul
y21 180
Plus30daysaftert
he180days
July 10
August 20
TotaldayonAugust20 30

CaseJ: May4, 2011.Thel astdaytoappealtotheCTAshoul

dbemadewit
hin30day
sfr
om t
he
recei
ptoft hedenialoftheBIR.The30day sisdeter
minedasfol
lows:
Days
Fir
stdenialoftheBI R–Mar ch22, 2011
to2ndr
equestf orreconsider
ation–Mar ch30,2011 8
nd
2 deni aloftheBIR–Apr i
l12,2011
toMay4, 2011t ocompl etethe30dayper i
od 22
Tot al
daysasofMay4, 2011 30

CaseK: June25,2011.Theappealt
oCTAshoul
dbemadewit
hin15day
sfr
om dat
eof
unf
avor
abl
edeci
sionf
rom CTAwasr ecei
ved(
June10pl
us15day
s).

CaseL: July10,2011.Theappeal
toSCshoul
dbemadewi
thi
n15day
sfr
om dat
eofr
ecei
ptsof
theunf
avor
abl
edecisionofCTA( June25pl
us15days)
.

CaseM:Mar
ch1,
2011.Wi
thi
n1y
earf
rom t
hedat
eofsal
e.

Problem 2–8 B
Originalbusi
nessregi
str
ati
onandrenewalofbusi
nessr
egi
str
ati
onaresubjecttoP500each.Thet
ransf
erof
registr
ationr
equir
esnoadditi
onal
regi
str
ati
onfeetobepai
dbythetaxpay
er .(
Sec.243,
NIRC)

Probl
em 2–9 D
Allcr
iminalvi
olat
ionmaybecompr
omi
sedexcept
:(a)t
hoseal
readyf
il
edi
ncour
t,or(
2)t
hosei
nvol
vi
ng
fr
aud.(Sec.204(B),NI
RC)

Pr
oblem 2–10 D
I
ncomet axpay
able P1,
000,
000
Mult
ipl
i
edbymi ni
mum compromiser
ateduebankr
upt
cy 20%
Mini
mum amountofcompromise P 200,
000

Problem 2–11 D
Amountoft axli
abi
l
ity P150,
000
Surchar ges 25,
000
I
nterest 20,
000
Advertisingcost 5,
000
Pri
cei fpurchasebytheGov
ernment P200,
000

Pr
obl
em 2–12 D
1. Let
terC
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NCOMETAXATION6THEdi
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Chapt
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TaxAdmi
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rat
ion

Actualexci
set
axont hefir
st6months P200,
000
Multi
pli
edbystat
utoryi
ncreasei
nrate 2
Requir
edbondsont helast6months P400,
000

I
fafter6mont hsofoper
ati
on,theamountofini
ti
albondi
slesst
hantheamountoft
he
t
otalexcisetaxpaidduri
ngtheperiod,t
heamountoft hebondshallbeadj
ust
edto
t
wicet hetaxact
uall
ypai
dfortheperi
od.[
Sec.160(A),NI
RC]

2. Notinthechoi ces,P400,000
Actualexci
set axont hefirsty
earapplicabl
et o
thesecondy ear(P200,000+P250, 000) P450,
000
Less:Excessofbondsov eractualexcisetax
Bondspai df i
rstyear(P100,000+P400, 000) P500,000
Actualexciset axfi
rstyear (
450,000) 50,
000
Netactualamountofbondf orthesecondy ear P400,
000

Thebondf orthesucceedi
ngyear
sofoperati
onshal
lbebasedont heact
ualtotal
exci
setaxpaiddur
ingtheyeari
mmedi
atel
yprecedi
ngt
heyearofoper
ati
on.[
Sec.160
(B),
NIRC]

Pr
obl
em 2–13 C
Xisnotenti
tl
edtorecei
vetheinfor
mer’
srewar
dbecausebei
ngaf
ir
stcousi
n,hei
sB’
s(anRDO)r
elat
ive
wi
thi
nthe6thdegr
eeofconsangui
nit
y.

Apubl i
coffi
cialorgovernmentempl
oyeeorhisrel
ati
vewit
hinthe6th degreeofconsangui
nit
yshal
lnotbe
enti
tl
edt otheinfor
mer ’
srewardof10% basedonthetaxrevenuerecov eredorP1,000,
000.whi
cheveri
s
l
ower .Thi
sinformer’
sreward,onceawar
dedshallbesubj
ecttoaf i
nalwi thhol
dingtaxof10%.(Sec.282,
NIRC)

Pr
obl
em 2–14
1. LetterD
Salespr i
ce P4,
000,
000
Less: Totalamountperassessment P2,
500,
000
Surcharge(P2,500,000x25%) 625,
000
Int
erest(P2,500,000x20%x3/ 12) 125,
000 3,
250,
000
Netamountaf t
erpublict axes,penal
ti
esandi
nter
est P 750,
000
Less: Capit
algainst ax(P4, 000,
000x6%) P 240,
000
DST( P4,000,000x1. 5%) 60,
000
Costofadv erti
sing 20,
000 320,
000
Excessamountt ober eturnedtoX P 430,
000

2. Let
terC
Purchasepri
ce P4,
000,
000
Add:Inter
est(
P4,000,
000x15%x9/
12) 450,
000
Redempt i
onpri
ce P4,
450,
000

Ther
edempti
onpri
ceiscompri
sedofthepur
chasepri
ceplus15%int
erestperannum
fr
om t
hedat
eofpurchaset
othedat
eredempti
on.(
Sec.214,NI
RC)

3. Lett
erC
Totalr
entincome( P60,
000x9mont hs) P540,
000
Less:I
nterestexpenset
oredeem t
heproper
ty 450,
000
Excessincome P 90,
000
I
NCOMETAXATION6THEdi
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ion

Theownershal
lnot,however,bedepriv
edofthepossessi
onofthesai
dproper
tyand
shal
lbeent
it
ledtother ent
sandot herincomet
her
eofuntilt
heexpi
rat
ionoft
heti
me
al
lowedf
orit
sredemption.(Sec.214,
NIRC)

Pr
oblem 2–15 C
St
atutor
yfi
ne(
P250,
000x2) P500,
000

Anytaxpayerwhosepropert
yhasbeenpl acedunderconst r
uctiv
edistr
aint,anddisposedt hesamewithout
theknowledgeandconsentoftheCommi ssi
onershallbepunishedbyaf ineofnotlesst hantwi
cethevalue
ofthepropert
ysol
d,encumberedordisposedof,butnotlessthanP5,000orsuf f
erimprisonmentofnotless
than2yearsand1daybutnotmor ethan4y ear
sorbot h.(Sec.206,
NIRC)

TheP5,
000f
inei
sappl
i
cabl
eonl
ywhent
hecomput
edamount(
sel
l
ingpr
icex2)i
slowert
hanP5,
000.

Problem 2–16 C
Proceedsf rom sale P350,
000
Less:Basict axassessed P300,
000
Accr uedinterestfr
om Apri
l15,
200xto
July15, 200x(P300,
000x20%x3/ 12) 15,
000
Document arystamptax 1,
500
Adv erti
sement 1,
000 317,
500
Amountt ober efundedtoMr.Poe P 32,
500

Problem 2–17 D
Proceedsf rom sale(P1,500/
0.005) P300,
000
Less:Basict axassessed P275,
000
Accr uedinterestfr
om Apr i
l15,
200xto
July15, 200x(P275,000x20%x3/ 12) 13,
750
Document arystampt ax 1,
125
Adv erti
sement 1,
000 290,
875
Amountt ober efundedtoMr .Li
got P 9,125

Probl
em 2–18 C
Total
sur
char
ge(
P10,
000x25%) P2,
500

25%surchar
geshal
lbei
mposedf
orl
atef
il
ingoft
her
etur
nandl
atepay
mentoft
het
ax.(
Sec.5,
Rev
.Regs.
No.12-
99)

Pr
oblem 2–19 C
I
nter
est(P10,
000x20%x2.
5/12) P416.
67

Thecomput
ati
onofi
nter
esti
sbasedonunpai
dbasi
ctax.(
RMCNo.46–99)
Problem 2–20 C
Basictax P10,
000
Surcharges:
Forlatefi
l
ingandpay
ment(25%) P2,
500
Forfil
ingi
nwrongRDO(25%) 2,
500 5,
000
I
nterest(P10,
000x20%x2.5/12) 417
Totalamountdue P15,
417
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ion

Probl
em 2–21 D
I
ncomet axdueperr eturn P100,
000
Add:Surchargeforwillf
ulneglectt
ofi
lethe
andl at
epayment( P100,000x50%) P50,
000
I
nterestfr
om April15,200Bt o
June30, 200C( P100,000x20%x14. 5/
12) 24,
167 74,
167
Totalamountdue, June30, 200C P174,
167

Latefi
li
ngandl at
epay mentoft axisat axpayer
’swil
lf
ulneglecti
fthepaymenti smadeonlyaftert
he
noti
fi
cati
onoftheBIR.Suchv i
olati
onissubjectto50%surchargeplus20%inter
estperannum comput
ed
fr
om theduedateofthetaxunt
ilthedat
eofpay ment.(
Rev.Regs.No.12-
99,Sec.5.
3)

Probl
em 2–22 B
I
ncomet axdueperr eturn P100,
000
Add:Surchargef orlatef i
li
ngandlat
epayment
-si
mpl eneglect( P100,000x25%) P25,
000
I
nterestfr
om Apr il15,200Bt
o
June30, 200B( P100,000x20%x2.5/12) 4,
167 29,
167
Totalamountdue( excludingcompromisepenal
ty) P129,
167

I
ft hevi
olat
ionislat
efil
ingandlat
epaymentoftax,onlyone25%sur chargeshal
lbeimposedforl
atef
il
ing
oft her
eturnandlatepaymentofthet
axplus20%i nterestperannum comput edfr
om theduedateofthe
taxunti
lthedateofpayment.(
RMCNo.46-99;Sec.5,Rev .Regs.No.12-99)

Problem 2–23 A
Unpaidt axdue P1,
000,
000
Addit
ionst otax:
Sur charge(P1,
000,
000x50%) P500,
000
Interestfr
om Apri
l15,
200Bt oDecember31,
200C( P1,000,
000x20%x1y ear&6.5mos. ) 341,
666 841,
667
TotalamountdueasofDecember31, 200C P1,
841,
667
Add:Excessamount 158,
333
Totalselli
ngprice P2,
000,
000
Add:St
atutor
yinter
estratetoredeem (
P2,
000,
000x15%) 300,
000
Totalamountneededt oredeem ther
ealpropert
y P2,
300,
000

Theredempti
onofthepropertysol
dthroughpubl
icauct
ionshal
lbemadewithi
noneyearf
rom t
hedat
eof
sal
esubjectt
oastatut
oryredempti
oninter
estr
ateof15%perannum.(
Sec.214,
NIRC)

Problem 2–24 B
Basicamountdueperassessment P 80,
000
Add:Sur chargef orsimpl
enegl
ect
topayont ime( P80,
000x25%) P20,
000
I
nt erest(P80,000x20%x45/360days) 2,
000 22,
000
Totalrequiredpay mentonJune30,200A P102,
000

[
Sec.248(
A)(
3)andSec.249(
B)(
3),
Rev
.Regs.No.12-
99,
Sept
.6,
1999]
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Problem 2–25 C
Unpaidincomet axdue(P3,
000,
000–P1, 000,
000) P2,
000,
000
Additi
onstot ax:
Surcharge(P2,
000,
000x50%) P1,
000,
000
I
nterest(P2,
000,
000x20%x3/ 12) 100,
000 1,
100,
000
TotalamountdueasofAugust15, 200B P3,
100,
000

Conceal
mentofincomeisaform off r
aud.Af al
seorfraudul
entr
etur
nissubj
ectt
oasur
char
geof50%
basedontheunpai
dtaxort
hedefi
ciencytax.[
Sec.248(
B),NIRC]

Probl
em 2–26 D
IncometaxdueperI TR P8,
000
Divi
dedbyinstall
mentsall
owed 2
Taxdueon1sti nst
all
ment P4,
000
Less:Taxcredi
t 3,
000
Taxpayable1stinstal
lment P1,
000

Whent
hetaxdueisi
nexcessofP2,000,t
hetaxpay
erot
hert
hanacor
por
ati
onmayel
ectt
opayt
het
axi
n
t
woequal
inst
all
ment
s(Sec.56(
A)(
2),NI
RC).

Pr
obl
em 2–27
1. LetterA
Incomet axdueperr eturn,
Apr i
l15,200B P1,
000,
000
Less: 1sti
nst al
l
ment ,Apri
l15,200B 250,
000
BalanceasofApr i
l15,200B P 750,
000
Add: I
nt erestfrom Apri
l15,200Bt oMay15,
200B
(P750, 000x20%x1/ 12) 12,
500
Totalamountdue, May15, 200B P 762,
500

2. LetterC
BalanceasofMay15, 200B P 500,
000
Add: I
nt erestfrom May15, 200Bt oJune15,200B
(P500, 000x20%x1/ 12) 8,
333
Totalamountdue, June15, 200B P 508,
333
Less: 3rdinstal
lment,June15, 200B
(P250, 000+P8, 333) 258,
333
BalanceasofJune15, 200B P 250,
000
Add: I
nt erestfrom June15, 200BtoJuly15,
200B
(P250, 000x20%x1/ 12) 4,
167
4thandf inal i
nstal
l
ment P 254,
167

Probl
em 2–28
Yes,becausetheprescri
pti
veper
iodoff
ili
ngthewrit
tenpr
otesti
swithi
n30daysfr
om r
eceiptof
assessment .Payt
her el
atedt
ax.Compromiseisnotaremedybecausetaxf
raudi
snotsubjectt
o
compromi se.

Pr
obl
em 2–29
1. Taxabl
eincome P1,
000,
000
I
NCOMETAXATION6THEdi
ti
on(
BY:
VALENCI
A&ROXAS) 10
SUGGESTEDANSWERS
Chapt
er2:
TaxAdmi
nist
rat
ion

Add: Di screpanci esperi nvesti

gation:
Undecl aredr ent al i
ncome P450,
000
Nondeduct i
bleint erestexpenses 300,
000
Nondeduct i
blebaddebtexpense 200,
000
Undocument edr epresentationexpenses 150,
000 1,
100,
000
Taxabl ei ncomeperi nvesti
gati
on P2,
100,
000
Mul t
ipliedbyi ncomet axrate 30%
Incomet axdue P 630,
000
Less: Incomet axpai dperr eturn 300,
000
Balance P 330,
000
Add: 50%Sur char gef orf i
li
ngaf raudul
entret
urn
(P330, 000x50%) P165,
000
20%i nterestperannum f rom April
15,2010
toApr il15, 2011( P330,000x20%) 66,
000 231,
000
Total amountdue P 561,
000

2. Totalamountdue P561,
000
Add:25%Sur chargeforl
atepayment
(
P561,000x25%) P140,
250
20%I nt
erestperannum fr
om Apri
l15,
2011
t
oJune15, 2011(P561,000x20%x2/12) 18,
700 158,
950
Totalamountdue( excl
udingsuggest
ed
compr omisepenalt
yforlatepayment
) P719,
950

Pr
oblem 2–30
a. Thecashr
ewar
dofMi
ssWanast
axi
nfor
merwoul
dbeP1,
000,
000,
themaxi
mum amountofr
ewar
d.

b. The i
nformer’
srewar
dremai
nspay
abl
e,hence,Mi
ssWan wi
l
lrecei
ved t
he maxi
mum r
ewar
d of
P1,
000,000.

c. Thefi
nalincomet
axt
obewi
thhel
dfr
om t
her
ewar
dofMi
ssWanwoul
dbe10% ofP1,
000,
000or
P100,
000.

Pr
oblem 2–31
a. Thetaxvi
olationsofMissSanTagoar ethefol
lowing:
1. Unregisteredbusi
ness(Sec.236[A]
,NIRC.)
2. Non-issuanceofcommer ciali
nvoi
ce(Sec.237,NIRC.
)
3. Ignor
ingt hesummon( Sec.5,NIRC.
)

b. MissSanTago’smini
mum f
inancialpenalti
esi
fconv
ict
ed:
1. Foroperati
nganunr
egi
steredbusi ness P5,000
2. Fornotissui
ngcommerci
al i
nvoices 1,
000
3. Fail
uret
oobeysummon 5,
000
Total
minimum P11,
000

Probl
em 2–32
None.Ther
eisnosurchar
get
obei
mposedtoOr
vil
l
eCor
por
ati
onbecauset
heer
rorwascor
rect
edbef
ore
paymentandthepay
mentwasmadeonti
me.

Thei
ncomet
axduei
scomput
edasf
oll
ows:

Corr
ectedgrossr
ecei
pts(P2,
000,
000/75%) P2,
666,
667
Corr
ectedall
owabl
ededucti
ons(P1,
500,000/
1.35) 1,
111,
111
Taxabl
eincomeperaudit P1,
555,
556
I
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Chapt
er2:
TaxAdmi
nist
rat
ion

Mult
ipl
ybypercentoft
axf
or201B 30%
I
ncomet axdue P 466,
667

Pr
obl
em 2–33
1. Pri
ncipalfactory P 500
War ehouses(P500x9) 4,
500
Branches( P500x30) 15,
000
Totalannual r
egist
rat
ionf
ee–Januar
y31,
200B P20,
000

2. Totalannualregist
rat
ionfee–Januar
y31,
200B P20,
000
Surcharges(20,000x25%) 5,
000
I
nterest(P20,000x20%x6/ 12) 2,
000
Totalamountdue–Jul y30,200B P27,
000

Problem 2–34
Amountoft axli
abi
l
ity P100,
000
Surchar ges 25,
000
I
nterest 20,
000
Advertisingcost 5,
000
Pri
cei fpurchasebytheGov
ernment P150,
000

Probl
em 2–35
Case1–Fi nanci
ali
ncapabil
ityduetocorpor
atei
nsol
vency
.
Deli
nquentaccounts P 500,
000
Pendingcasesunderadmi nistr
ati
vepr
otest 900,
000
Cri
minal v
iolat
ionnotfi
ledincourts 1,
000,
000
Totalbasi
ct ax P2,
400,
000
Multi
pli
edbyappl i
cablecompr omiser
ate 20%
Amountofcompr omise P 480,
000

Case2–Fi nancialincapabili
tyduetosurpl
usdef
ici
tresul
ti
ngt
oimpai
rmenti
nor
igi
nalcapi
talbyatleast
50%.
Del
inquentaccount s P 500,
000
Pendingcasesunderadmi nistr
ati
vepr
otest 900,
000
Cri
minal vi
olat
ionnotf i
ledincourts 1,
000,
000
Totalbasictax P2,
400,
000
Multi
pli
edbyappl icablecompr omiser
ate 40%
Amountofcompr omi se P 960,
000

Case3–Doubt f
ulvalidi
tyofassessment.
Del
inquentaccounts P 500,
000
Pendingcasesunderadmi nist
rat
ivepr
otest 900,
000
Cri
minal v
iol
ati
onnotf il
edincourt
s 1,
000,
000
Totalbasi
ctax P2,
400,
000
Multi
pli
edbyapplicablecompromi ser
ate 40%
Amountofcompr omi se P 960,
000

Pr
obl
em 2–36
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SUGGESTEDANSWERS
Chapt
er2:
TaxAdmi
nist
rat
ion

a. Yes,becausetheoffer
edcompr
omi
seamountofP100,
000exceedst
her
equi
redmi
nimum amountof
P25,000,(
P250,000x10%)
.

b. Sincedi
str
ainti
simposedonlyonper
sonalpr
oper
ty,t
heper
sonalpr
oper
tywi
thav
alueofP100,
000
shall
besubject
edt
odistr
aint
.

c. Yes,l
evyofrealpropert
yanddist
rai
ntofper
sonalpr
oper
tycanbedonesi
mul
taneousl
y(Sec.207Bof
theTaxCode).SeealsoSect
ion205ofNIRC.

d. No,t heunpai
dpor t
ionwillremai
nast axli
abi
li
tyofLuguibecauseMi ssLuguididnotav ailofthe
compr omi
setaxsettlement.Theremedybydistr
aintofper
sonalproper
tyandlevyonr eal
tymaybe
repeatedi
fnecessar
yuntilt
heful
lamountdue,i
ncl
udingal
lexpenses,i
scol
lect
ed(Sec.217,NIRC).