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Tax Civ Ethics

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2015 ETHICS SUMMER REVIEWER ERRATUM

1. Definition of Deposit Subtitute, p. 55

Deposit substitutes are defined as an alternative form of obtaining funds from the public (meaning borrowing from 20 or more lenders at any one time) other than deposits.

Clarification:

Thus, from the point of view of the financial market, the phrase at any one time for purposes of determining the 20 or more lenders would mean every transaction executed in the primary or secondary market in connection with the purchase or sale of securities. (BDO v. Republic, G.R. No. 198756, January 13, 2015)

2. Forgiveness of Indebtedness, p. 70

A GIFT if effect of entire transaction is a reduction of purchase price of property acquired in prior year)Not Taxable

A CAPITAL TRANSACTION if the forgiveness of a stockholder is equivalent to dividend distributionTaxable

A TAXABLE INCOME in exchange of a service performedTaxable

Clarification:

Under the first scenario, the reduction of purchase price is not taxable under income tax, but it may be considered taxable under donor's tax.

3. Exclusions from Gross Income, pp. 72-75

a. Proceeds of Life Insurance policiesb. Amount received by insures as return of premiumc. Amounts received under life insurance, endowment or annuity contractd. Value of Property Acquired by Gifts, Bequests, Devise or Descente. Amount received through accident or health insurancef. Income exempt under treatyg. Retirement benefits, pensions, gratuities, h. Winnings, prizes, awardsAddition:Section 32 (7) of NIRC, as amended by RA 10653 (An Act Adjusting the 13th Month Pay and Other Benefits Ceiling Excluded from the Computation of Gross Income for Purposes of Income Taxation, Amending for the Purpose Section 32(B), Chapter VI of the National Internal Revenue Code of 1997, as amended.) Excluded from gross income are the 13th month pay and other benefits the total of which does not exceed P82,000. If the benefits exceed P82,000, only the excess will be taxable. This rule is not applicable to self-employed individuals and income generated from businessSee also: Taxation on Compensation Income; Exclusions; 13th month pay and other benefits, pp. 96-974. Exempt Corporations, p. 95

(a) Proprietary Educational Institutions and Hospital

Correction:

(a) Proprietary Educational Institutions and Hospitals which are Non-Profit (Sec. 27 (B), NIRC)

5. Optional Standard Deduction, p. 106

An amount not exceeding forty percent (40%) of gross income

Note:

For corporations, the basis of 40% is GROSS INCOME. For individuals, the basis is GROSS RECEIPTS OR SALES. (Section 34 (L), NIRC)

See also: Discussion on Optional Standard Deduction on page 92.

6. VAT Exemptions: Sale of two or more residential lots, p. 160

If two or more adjacent residential lots are sold or disposed in favor of one buyer, for the purpose of utilizing the lots as one residential lot, the sale shall be exempt from VAT only if the aggregate value of the lots do not exceed 1.9195M (as amended by RR No. 16-2011 and RR No. 13-2012)

Note:The sale, transfer or disposal of the two or more adjacent lots must be made within a 12-month period. (RR 13-2012)

7. Summary of Tax Remedies for Taxpayers and the Government, p. 174A. Remedies of TaxpayersBefore Payment of TaxesCorrection:A. Remedies of TaxpayerBefore Payment of Taxes Due to an Assessment8. Special Education Fund, p. 2522. Special levies: Special Education Fund (SEF) 1% additional real estate tax to finance the SEF (Sec. 235, LGC) - within MM area onlyCorrection:2015 TAXATION LAW SUMMER REVIEWER ERRATUM

SEF may be levied not only by municipalities within Metro Manila Area but also by provinces or cities. (Sec. 235, LGC)

1. VOID MARRIAGES (p. 31)

d. VOID FOR REASON OF PUBLIC POLICY UNDER ART. 38x x xiii. Between parents-in-law and children-in-law x x x

Addendum:iii. Between parents-in-law and children-in-law (DEATH DOES NOT TERMINATE AFFINITY WHETHER WITH CHILDREN OR NOT)2. ANNULLABLE MARRIAGES (p. 34)Circumstances constituting fraud: (Art. 46Requisites of Annulment due to Impotence:a. Impotence exists at the time of the celebration of marriageb. Permanentc. Incurabled. Unknown to the other spousee. The other spouse must not also be impotent

Correction:Requisites of Annulment due to Impotence:a. Impotence exists at the time of the celebration of marriageb. Permanentc. APPEARS INCURABLE AND CONTINUOUS

3. TITLE OF TABLE (p. 36)

EFFECTS OF VOIDABLE BIGAMOUS MARRIAGE, DECLARATION OF NULLITY AND ANNULMENT

Correction: EFFECTS OF VOID BIGAMOUS MARRIAGE, DECLARATION OF NULLITY, AND ANNULMENT4. TITLE OF TABLE, second column (p. 36)VOIDABLE BIGAMOUS MARRIAGE (ART. 41)

Correction:VOID BIGAMOUS MARRIAGE (ART. 41)5. RULES WHEN LANDOWNER (LO) BUILDER/PLANTER/SOWER (BPS) MAKES CONSTRUCTIONS/PLANTINGS WITH MATERIALS OF ANOTHER (OM) (p. 84)

Addendum:Note: This chart is from Atty. Francis H. Ampil6. RULES WHEN BPS BUILDS, PLANTS, SOWS ON THE LAND OF ANOTHER (LO) (p. 85)

Addendum:Note: This chart is from Atty. Francis H. Ampil

7. RULES WHEN THREE (3) PARTIES ARE INVOLVED (p. 87)

Addendum: Note: This chart is from Atty. Francis H. Ampil

8. C. AGAINST WHOM PRESCRIPTION MAY RUN (p. 138)

1. Minors and incapacitated person who have guardiansAddendum:PARAS: CAN STILL RUN, BUT SUCH PEOPLE CAN BRING AN ACTION AFTER DISABILITY HAS CEASED.9. C. AGAINST WHOM PRESCRIPTION MAY RUN (p. 138)

1. Minors and incapacitated person who have guardians2. Absentees who have administrators3. Persons living abroad who have administrators4. Juridical persons EXCEPT the state with regard to property not patrimonial in character5. Between husband and wife6. Between parents and children (during minority/insanity)7. Between guardian and ward (during guardianship)8. Between co-heirs/co-owners9. Between owner of property and person in possession of property in concept of holder

Correction and addendum:9. Between husband and wife (ONLY IF SPECIFICALLY PROVIDED FOR BY LAW)10. Between parents and children (during minority/insanity) PRESCRIPTION MAY RUN11. Between guardian and ward (during guardianship) PRESCRIPTION MAY RUN12. Between co-heirs/co-owners THERE MUST BE DEFINITE REPUDIATION FIRST13. Between owner of property and person in possession of property in concept of OWNER

10. CONDITIONAL OBLIGATIONS (p. 145)

The performance in conditional obligations depends upon a future AND uncertain event or upon a past event unknown to parties.Addendum:THE AND MUST BE REALLY CONSTRUED AS OR.8. PRINCIPLES APPLICABLE FOR A VALID PAYMENT OR PERFORMANCE 1. PRINCIPLE OF IDENTITY b. WITH RESPECT TO PARTIES - i. PAYOR (p. 157)

3rd person interested in the fulfillment of the obligation creditor must accept the payment and debtor need not give his There is full subrogation in this case, even if the debtor does not consent to the payment.

Correction: 3rd person interested in the fulfillment of the obligation creditor must accept the payment and debtor need not give his CONSENT. There is full subrogation in this case, even if the debtor does not consent to the payment.

Addendum:THE DELETION IS CORRECT. RULE:1) W/O DEBTORS CONSENT Only the cost which the third person paid to creditor will be the extent of third persons right to collect.2) W/ CONSENT third person gets all rights including right against securities, collateral guarantees, etc.

11. SPECIAL RULES/FORMS OF PAYMENT 1. APPLICATION OF PAYMENTS

REQUISITES (OTDI)a. There must be only one debtor and only one creditor;b. Two or more debts of the same kind; andc. All debts must be due.

Exception: There may be application of payment even if all debts are not yet due if: Parties so stipulate When application of payment is made by the party for whose benefit the term has been constituted Amount paid by the debtor is insufficient to cover the total amount of all debts.

Correction:REQUISITES (OTDI)a. There must be only one debtor and only one creditor;b. Two or more debts of the same kind; andc. All debts must be due.

Exception: There may be application of payment even if all debts are not yet due if: Parties so stipulate When application of payment is made by the party for whose benefit the term has been constituted

d. AMOUNT PAID BY THE DEBTOR IS INSUFFICIENT TO COVER THE TOTAL AMOUNT OF ALL DEBTS.

12. REQUISITES OF IMPLIED CONDONATION (p. 165)

REQUISITES OF IMPLIED CONDONATION1. Voluntary delivery of evidence of indebtedness when evidence of indebtedness is found in the possession of the debtor there is a rebuttable presumption of voluntary delivery, which if not rebutted, will extinguish the obligation. 2. If there if actual proof, or the presumption above is not rebutted, that the evidence of indebtedness was returned by the creditor to the debtor, the obligation is extinguished.a. If in hands of joint debtor only his share is condoned.b. If in hands of solidary debtor - whole debt is condoned.c. Tacit voluntary destruction of instrument by creditor; made to prescribe w/o demanding.

Correction:EXAMPLES OF IMPLIED REMISSION1. Voluntary delivery of evidence of indebtedness when evidence of indebtedness is found in the possession of the debtor there is a rebuttable presumption of voluntary delivery, WHICH IF NOT REBUTTED, WILL CREATE THE PRESUMPTION OF WAIVER CONDONATION (REMISSION) WHICH IN EFFECT EXTINGUISHES THE DEBT. 2. If there if actual proof, or the presumption above is not rebutted, that the evidence of indebtedness was returned by the creditor to the debtor, THERE IS A PRESUMPTION OF WAIVER.a. If in hands of joint debtor only his share is condoned.b. If in hands of solidary debtor - whole