2004 BAR QUESTIONS AND SUGGESTED ANSWERS

Estate Tax: Payment vs. Probate Proceedings (2004)

VCC is the administrator of the estate of his father NGC,in the estate proceedings pending before the MM Regional Trial Court. Last year, he received from the Commissioner of Internal Revenue a deficiency tax assessment for
the estate in the amount of P1,000,000.But he ignored the notice. Last month, the BIR effected a levy on the real properties of the estate to pay the delinquent tax. VCC filed a motion with the probate court to stop the enforcement
and collection of the tax on the ground that the BIR should have secured first the approval of the probate court, which had jurisdiction over the estate, before levying on its real properties. Is VCC's contention correct? (5%)

SUGGGESTED ANSWER:

No. VCC's contention is not correct. The approval of the probate court is not necessary. Payment of estate taxes is a condition precedent for the distribution of the properties of the decedent and the collection of estate taxes is
executive in nature for which the court is devoid of any jurisdiction. Hence, the approval of the court, sitting in probate, or as a settlement tribunal is not a mandatory requirement in the collection of estate taxes ( Marcos H v.Court
of Appeals, 273 SCRA 47 [1997 ]

VAT; Exemption: Constitutionality (2004)

A law was passed exempting doctors and lawyers from the operation of the value added tax. Other professionals complained and filed a suit questioning the law for being discriminatory and violative of the equal protection clause
of the Constitution since complainants were not given the same exemption. Is the suit meritorious or not? Reason briefly. (5%)

SUGGESTED ANSWER:

Yes, the suit is meritorious. The VAT is designed for economic efficiency; hence, should be neutral to those who belong to the same class. Professionals are a class of taxpayers by themselves who, in compliance with the rule of
equality of taxation, must be treated alike for tax purposes. Exempting lawyers and doctors from a burden to which other professionals are subjected will make the law discriminatory and violative of the equal protection clause of
the Constitution. While singling out a class for taxation purposes will not infringe upon this constitutional limitation ( Shell v. Vano, 94 Phil. 389[1954] ), singling out a taxpayer from a class will no doubt transgress the
constitutional limitation ( Ormoc Sugar Co.Inc., v. Treasurer of Ormoc City, 22 SCRA 603 [1968 ]). Treating doctors and lawyers as a different class of professionals will not comply with the requirements of a reasonable, hence
valid classification, because the classification is not based upon substantial distinction which makes real differences. The classification does not comply with the requirement that it should be germane to the purpose
of the law either. ( Pepsi-Cola Bottling Co.,Inc. v. City of Butuan, 24 SCRA 789 [1968] ).

ANOTHER ANSWER:

No. The suit is not meritorious. The equal protection clause of the Constitution merely requires that all persons subjected to legislation shall be treated alike, under like circumstances and conditions, both in the privileges conferred
and in the liabilities imposed. The equality in taxation rule is not violated if classifications or distinctions are made as long as the same are based on reasonable and substantial differences. {Pepsi-Cola Bottling Co., Inc.v. City of
Butuan, 24 SCRA 789 [1968 ]).In the instant case, the professions of doctors and lawyers are not principally aimed at earning money but for the service of the people. The exemption granted to doctors and lawyers from the
operation of the VAT is justified, as it is not discriminatory against the other professionals because they have reasonable and substantial differences in the conduct of their professions.