Enhancement Activity

I. Prescription of assessment
 Mr. X filed his 2014 annual income tax return which was due on April 15,2015 on March 1,2015. The
government must serve the assessment to the taxpayer on or before April 15, 2018.
 Assume instead that Mr. X filed his 2014 annual income tax return on July 1,2015. The assessment
must be served on or before July 1, 2018.
 Any unpaid tax for a donation made on July 1, 2014 must be assessed on or before July 31, 2017.
 Any unpaid VAT for the quarter ended August 31, 2015 must be assessed on or before September
25, 2018.

II. Distraint and or Levy

Problem:
Miss MalouLugui was assessed with tax liability of P250,000 exclusive of penalty. The financial status of
Miss Lugui when the demand for payment is as follows:
Total properties:
Real Property P200,000
Personal Property 100,000
Total liabilities, exclusive of tax 150,000

Required:
a. Assuming that a distraint proceeding was carried out instead, which of the above properties would
be issued with warrant of distraint?
- Personal property worth P100,000
b. If all the properties of Miss Lugui have a realizable value of P200,000 after payment of her P150,000
liabilities and possible cost of the proceedings, would it be possible for the government to carry out
the distraint and levy proceeding simultaneously to effect the conversion of Miss Lugui’s assets into
cash?
- Yes
c. If, after the properties of Miss Lugui were sold in public auction only P200,000 was realized and used
as payment of her tax liabilities, would this extinguish the unpaid tax liabilities of Miss Lugui?
- No. The revenue officer shall look for properties of the taxpayer that may be attached to
extinguish the tax liabilities.

III. Levy of real property

After proper proceedings, the real property of X was levied by the government to satisfy his tax liability
which has been delinquent for 5 years. The real property is a boarding house with an average income of
P60,000 per month. X received the total amount of assessment as follows:

Basic income tax unpaid P 1,000,000

Surcharge (P1,000,000 x 50%) 500,000
Interest (P1,000,000 x 20% x 5years) 1,000,000
Total amount due per assessment, October 15, 200A P 2,500,000
The property was sold for public auction for P4,000,000 on January 15, 200B. Cost of advertisement
amounts to P20,000. It was stipulated in the contract that the related capital gains tax and documentary
stamp tax shall be paid by X.

Required:
1. How much is the excess amount of the sale over the claim and cost of sale that should be turned over
to X?

Selling Price 4,000,000

Tax Due 2,500,000
Cost of Sale (20,000)
Capital gains tax (4Mx6%) ( 240,000)
Documentary stamp tax (4M/1k*1.5) (60,000)
Excess 1,180,000

2. If X decided to redeem the real property on October 15, 200B, how much is the redemption price?

Tax Due P2,500,000

Interest(4M*15%*9/12) 450,000
Redemption Price P2,950,000

3. How much is the excess income of the real property over the interest expense from the time of
auction sale to the time of redemption?

Income of Real Property P540,000

Interest (450,000)
Excess Income 90,000

IV. Prescriptive period of collection

1: On July 15,2015, Mr. A filed his 2014 income tax return which should have been filed April 15,2015.
He paid the tax on Aug. 15,2015. The BIR issued a deficiency assessment on Aug. 2,2017.
The deadline to enforce collection shall be on or before August 2, 2022.

2. On March 3,2015, the BIR sent an undated assessment letter. The assessment covers the unpaid
estate tax of a decedent which should have been paid March 5,2014. The estate administrator received
the assessment on March 18,2015.
The deadline to enforce collection shall be on or before March 18, 2020.

3. The taxpayer didn’t file an income tax return for the year 2001. The BIR discovered the non-filing on
May 4,2008. The BIR issued a delinquency assessment on July 15,2010.
The deadline to enforce collection is on or before July 15, 2020.
4. A fraudulent VAT return for the third quarter of 2003 was filed on October 25, 2003. It was discovered
on November 10, 2004. When is the last day for the government to collect through judicial proceedings?
- November 10, 2014

V. Tax Assessment/Refund Procedures

Instruction: Determine the last day to exercise the rights of the taxpayer.
Case A:
Date of tax return filed April 15, 2011
Date of material non-inclusion of income discovered June 20, 2012
Question: When is the last day to amend the tax return? April 15, 2014

Case B:
Date of tax return filed April 15, 2011
Date of tax return amended October 20, 2012
Question: When is the deadline to assess tax return? October 20, 2015

Case C:
Date of fraudulent tax return filed April 15, 2011
Date when tax fraud was discovered by BIR April 15, 2015
Question: When is the deadline to file a proceeding in court for
tax collection? April 15, 2025

Case D:
Date of tax return was not filed April 15, 2011
Date when the omission was discovered by BIR April 15, 2012
Question: When is the deadline to assess tax return? April 15, 2022
Case E:
Date of tax erroneously paid April 15, 2011
Date of claim for refund was filed with BIR May 20, 2013
No decision on the claim of refund was made
Question: When is the last day to appeal to the CTA? June 5, 2013

Case F:
Date of tax erroneously paid June 10, 2011
Date of claim for refund was filed with BIR March 3, 2012
Date of BIR decision of denial was received April 5, 2013
Question: When is the last day to appeal to the CTA? May 5, 2013

Case G:
Date of tax erroneously paid June 10, 2011
Date of claim for refund was filed with BIR June 10, 2012
Date of refund check received July 15, 2012
Date when BIR decision to grant refund was delivered August 1, 2012
Question: If the refund check was not encashed, when is the starting date for the government to forfeit
it? August 2, 2017

Case H:
Date of tax erroneously paid June 10, 2011
Date of claim for refund was filed with BIR June 10, 2012
Date of tax credit certificate July 30, 2012
Date when BIR decision was received August 21, 2012
Question: If the tax credit certificate was not utilized or revalidated, when is the starting date for the
government to revert it to the general fund? August 22, 2017

Case I:
Date of assessment was received January 2, 2011
Petition for reconsideration was filed with BIR January 12, 2011
Documents to support petition submitted January 22, 2011
No decision on the protest as of July 12, 2011
Question: When is the latest day to appeal to the CTA? July 22, 2011

Case J:
Assessment received January 5, 2011
Petition for reconsideration filed with BIR February 1, 2011
Documents to support petition submitted February 7, 2011
Decision of BIR denying the petition March 22, 2011
2nd request for reconsideration filed with BIR March 30, 2011
Decision on 2nd request denied April 12, 2011
Question: When is the last day to appeal to the CTA? May 12, 2011

Case K:
Date when assessment was received October 1, 1999
Petition for reconsideration was filed with BIR October 9, 1999
BIR decision of denial was received July 2, 2000
Second request for reconsideration was filed with the BIR July 15, 2000
Date revised assessment was received July 5, 2001
The last day to appeal to the Court of Tax Appeals is on: August 5, 2001

Case L:
Date of appeal to the CTA April 21, 2011
Date of adverse decision of the CTA June 1, 2011
Date the CTA adverse decision received June 10, 2011
Question: When is the last day to appeal to the Supreme Court? July 10, 2011
Case M:
Date of appeal to the CTA June 10, 2011
Date of adverse decision of the CTA June 20, 2011
Date the CTA adverse decision received June 25, 2011
Question: When is the last day to appeal to the Supreme Court? July 10, 2011

Case N:
Date the real property was levied January 5, 2011
Date the real property levied was sold March 1, 2011
Question: When is the last day to redeem the real property? March 1 2012

VI. Compromise
The following cases are available from the records of the BIR resulting from compromise proposals of
corporations:
Basic Tax Surcharge Interest
Delinquent accounts P 500,000 P 125,000 P 100,000
Pending cases under administrative protest 900,000 450,000 180,000
Criminal violation not filed in courts 1,000,000 250,000 200,000
Withholding tax cases 2,000,000 500,000 400,000
Criminal violations filed in courts 5,000,000 2,500,000 1,000,000
Totals P9,400,000 P3,825,000 P1,880,000

Required: How much is the amount of compromise allowed using the following reasons (independent
assumptions):

Case 1: Financial incapacity

Basic Tax
Delinquent accounts P 500,000
Pending cases under administrative protest 900,000
Criminal violation not filed in courts 1,000,000
2,400,000
X 10%
240,000
Case 2: Financial incapability due to surplus deficit resulting to impairment in original capital by at least
50%.
Basic Tax
Delinquent accounts P 500,000
Pending cases under administrative protest 900,000
Criminal violation not filed in courts 1,000,000
2,400,000
X 40%
960,000

Case 3: Doubtful validity of assessment.

Basic Tax
Delinquent accounts P 500,000
Pending cases under administrative protest 900,000
Criminal violation not filed in courts 1,000,000
2,400,000
X 40%
960,000