What is the “all events test”? Explain briefly. (2%)
What is the “immediacy test”? Explain briefly. (2%)
What is the “rational basis” test? Explain briefly. (2%)
What is the effect of the execution by a taxpayer of a “waiver of the statute of limitations” on his defense of prescription? (2%)
What is the basis for the computation of business tax on contractors under the Local Government Code? (2%)
How are retiring businesses taxed under the Local Government Code? (2%)
Suggested answer only. Not an official answer and not legal advice.
1) All events: fixes accrual right/liability and amount. 2) Immediacy: IAET profits for immediate business needs. 3) Rational basis: equal protection test for tax classification. 4) Waiver: extends assessment time, not waiving prescription if void. 5) Contractor tax: preceding year gross receipts. 6) Retiring business: current year gross sales/receipts.
1) Isabela Cultural. 2) Cyanamid Phils.. 3) BAT v. Camacho. 4) Phil. Journalists. 5) Sec. 143(e), LGC. 6) Sec. 145, LGC.
Accrual requires fixed liabilities; IAET needs immediate business needs; tax classification requires a rational State purpose; waivers extend time without forfeiting prescription if invalid; contractors pay on prior year receipts; retiring firms pay on current receipts.
Thus, these rules govern accrual, IAET, classification, prescription, contractor LBT, and business retirement taxation.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
Under the all events test, when is an expense accrual properly recognized for income tax purposes?
The all events test requires that the liability be fixed and the amount determined with reasonable accuracy.
What does the immediacy test evaluate under the Improperly Accumulated Earnings Tax rules?
The immediacy test determines whether retained earnings correspond to immediate or reasonably anticipated business needs.
What is the legal effect of executing a valid waiver of the statute of limitations under the NIRC?
A valid waiver extends the period for the BIR to assess or collect taxes to an agreed date.
What is the basis for computing local business tax on contractors under Section 143(e) of the Local Government Code?
Section 143(e) of the Local Government Code mandates that contractor tax be computed on preceding year gross receipts.
How are retiring businesses taxed for local business tax purposes under Section 145 of the Local Government Code?
Under Section 145 of the LGC, a retiring business is taxed on gross sales or receipts for the current calendar year up to retirement.
Learn more about these topics
1. Tax Accounting Principles
Under the all events test, accrual of income or expense occurs when all events have taken place that fix the right to receive or the liability to pay, and the amount can be determined with reasonable accuracy. In accumulated earnings taxation, the immediacy test determines whether profit retention serves the immediate or reasonably anticipated needs of the business, justifying non-distribution.
2. Tax Assessment Waiver
A waiver of the statute of limitations is a bilateral agreement between the taxpayer and the BIR extending the assessment or collection period. Executing a valid waiver defers the defense of prescription until the extended expiry date. However, an invalid or defective waiver confers no authority on tax officials and does not deprive the taxpayer of invoking prescription.
3. Local Business Taxation
Under Section 143(e) of the Local Government Code, local business tax on contractors is computed based on gross receipts for the preceding calendar year. Conversely, under Section 145, a retiring business pays local business tax based on gross sales or gross receipts realized during the current calendar year up to the date of business retirement.