2007 Late Breakers Taxation

8/12/2019 2007 Late Breakers Taxation

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DOMONDONs LATEBREAKERS

TAXATION1Ver. 2007

This Handou is s!e"ia##$ !re!ared o %ee he needs o&'re()ee* Re+ie,ees in Ta-aion and is inended osu!!#e%en he auhors #e"ures on he su/e". ries ose"ond(uess3 !roa#e 4uesions ha %a$ e as*ed in he2007 Bar E-a%s in Ta-aion "onsiderin se#e"ed Su!re%e

De"isions u! o 5u#$ 2007. & he re"en de"isions are %erereieraions o& !rior do"rines hen he auhor has de"ided osi"* o he o#der "ases.

GOOD LUCK TO EVERYBODY AND SEE YOUALL IN COURT AS WORTHY OPPOSING COUNSELS.

GENERAL PRINCIPLES OF TAXATION

1. What is the power to tax ? What is itsnature ?

ANS)ER6 The !o,er o a- is an inheren !o,er o& hesae e-er"ised hrouh he #eis#aure i%!osin urdens u!onsu/e"s and o/e"s ,ihin is /urisdi"ion o raise re+enues inorder o %ee he #eii%ae o/e"s o& o+ern%en.

s naure is ha i is oh an inheren !o,er o&o+ern%en and an e-er"ise o& #eis#ai+e !o,er.

is inheren in "hara"er e"ause i "ou#d e e-er"isede+en in he asen"e o& a "onsiuiona# ran. is an e-er"ise

1 're!ared $ 'ro&. Ae#ardo T. Do%ondon AB 8E"on9 BS:

8A""9 LLB MA 8E"on9 LLM D:L 8:and.9. La,$er(:'A(:uso%s

Bro*er Manae%en :onsu#an 'ro&essor o& La, and 're(BarRe+ie,er.

#eis#ai+e !o,er e"ause i is ha de!ar%en ha !ro%u#aeru#es and a-aion is he !ro%u#aion o& ru#es su"h as ho,%u"h a- is o e !aid ,ho !a$s he a- o ,ho% shou#d i e!aid and ,hen i shou#d e !aid.

2. When does the power to tax involve the powerto destroy ?

ANS)ER6 The !o,er o a- in+o#+es he !o,er odesro$ ,here he a- #a, is +a#id e"ause a a-!a$er "ou#dno see* he nu##i&i"aion o& a +a#id a- #a, so#e#$ u!on he!re%ise ha he "o##e"ion o& he a- ,i## i%!o+erish hi%.

3. When is the exercise of the power to tax notdestructive of a taxpayers property?

ANS)ER6 The e-er"ise o& he !o,er o a- is nodesru"i+e o& a a-!a$ers !ro!er$ ,here he sour"e is anin+a#id a- #a, ,hi"h +io#aes he inheren or "onsiuiona##i%iaion e"ause here is a s$%!ahei" "our ha sha## "o%e

o he su""or o& he a-!a$er and de"#are su"h a- #a, as nu##and +oid. ,ou#d no hus e he sour"e o& he !o,er odesro$.

4. What is the presumption with respect to thevalidity of tax statutes ? Why?

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6. Ta !!"#$%&'( a)! ($)%*$+, *&'($)-! a/a%'($$0! $a#a,!) a' +%!)a++, %' a&) & $0! S$a$!and %us e"#ear#$ sho,n and ased on #anuae in he #a, oo !#ain o e%isa*en ("avao Gulf um#er Corporation v. Commissioner ofInternal Revenue, et al., 2?= S:RA 7@ $,e"ause a-es arene"essar$ &or he "oninued e-isen"e o& he Sae.

. In 1996 osemarie! a nonresident citi"en! wascollected #hilippine income taxes on her incomes derivedfrom sources without the #hilippines$ %pon the enactmentof the &I' of 199( which too) effect on *anuary 1! 199+!she filed a claim for refund of the taxes she paid prayingfor the retroactive application of the provision thatsub,ects nonresident citi"ens to tax only on their incomesfrom within$ Should the refund be granted ?

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13. O'! & $0! #-)#&(!( & $aa$%&' %( $& )a%(!)!!'-!( o %ee he re"oniCed o/e"s o& !ur!oses o&o+ern%en. Thus is ased he #i&e#ood heor$ ,hi"h !osisha he re+enues "o##e"ed "onsiue he #i&e#ood haani%aes he e-isen"e o& o+ern%ens ,ihou ,hi"ho+ern%ens "anno !er&or% he &un"ions &or ,hi"h he$ ,ereesa#ished.

14. T0! (-"#$-a), #-)#&(! & $aa$%&' %( $)&"&$! $0! /!'!)a+ !+a)! a' $& #)&$!*$ $0! 0!a+$0:(a!$, &) "&)a+( & $0! %'0a%$a'$(. is in he /oin e-er"iseo& he !o,er o& a-aion and !o#i"e !o,er ,here reu#aor$a-es are "o##e"ed.

Ta-aion %a$ e %ade he i%!#e%en o& he saes!o#i"e !o,er. The %oi+aion ehind %an$ a-aion %easuresis he i%!#e%enaion o& !o#i"e !o,er oa#s. 'outhern CrossCement Corporation v. Cement anufacturers Association of thePhilippines, et al., >0 Auus = 200> "iin ut) v.

Araneta, ? 'hi#. 1 1>2 81?>>9F in urn "iin Great Atl. * Pac. TeaCo. v. Gros+ean, =02 ;.S. 12F .'. v. Biutler, 2?7 ;.S. 1F cCullochv. ar!land, )heaon =1@ The reader shou#d noe ha he Auus= 200> 'outhern Cross "ase is he de"ision on he %oion &orre"onsideraion o& he 5u#$ 200 'outhern Cross de"ision.

The so("a##ed sin a-es3 on a#"oho# and oa""o%anu&a"urers he#! dissuade he "onsu%ers &ro% e-"essi+eina*e o& hese !oenia##$ har%&u# !rodu"s. 8'outhern CrossCement Corporation v. Cement anufacturers Association of thePhilippines, et al., >0 Auus = 200>9

15. R!/-+a$&), $a!( (0&-+ '&$ ! &'!)&-(. As an

e#e%enar$ !rin"i!#e o& #a, #i"ense a-aion %us no e soonerous o sho, a !ur!ose o !rohii a usiness ,hi"h is noin/urious o hea#h or %ora#s.3 Terminal -acilities and 'ervicesCorporation v. Philippine Ports Authorit!, =7 S:RA 2 820029

16. T0! *&"#!'(a$&), #-)#&(! & $aa$%&' is oi%!#e%en he so"ia# /usi"e !ro+isions o& he "onsiuionhrouh he !roressi+e s$se% o& a-aion ,hi"h ,ou#d resu#o e4ua# disriuion o& ,ea#h e".

'roressi+e in"o%e a-es a##e+iae he %arin e,eenri"h and !oor. 8'outhern Cross Cement Corporation v. Cement

anufacturers Association of the Philippines, et al., >0Auus = 200>9

1. What are the distinctions between a taxand a license fee ?

S; 1=0

S:RA @>9 and he e#ie& ha a-es are #i&e#ood o& he sae.8'outhern Cross Cement Corporation v. Cement anufacturers

Association of the Philippines, et al., >0 Auus =200> "iin Ta-es ein he #i&e#ood o& he o+ern%en heir

!ro%! and "erain a+ai#ai#i$ is o& he essen"e.3 'ison v. Ancheta,

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id., "iin era v. -ernande),


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,ih !u#i" ineres !u#i" ene&i !u#i" ,e#&are and !u#i""on+enien"e. 8Commissioner of Internal Revenue v. Central u)on"rug Corporation, ?@7 A!ri# 1@ 200>9

2. Ta#a,!)(? (-%$ %( a *a(! 0!)! $0! a*$*&"#+a%'! & %)!*$+, %'&+!( $0! %++!/a+ %(-)(!"!'$ -+%* -'( !)%! )&" $aa$%&'. 85usi"e Me#o dissenin in

1ilos#a!an, Inc. v. Guingona, 2r. 2=2 S:RA 1109

27. What is locus standi ?ANS)ER6 ocus standi is a rih o& a!!earan"e in a

"our o& /usi"e on a i+en 4uesion. 8A#a!a v. 0#dane,


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een !ersona##$ in/ured $ he o!eraion o& a #a, or an$ ohero+ern%en a" u $ "on"erned "iiCens a-!a$ers or +oers,ho a"ua##$ sue in he !u#i" ineres6

a. Ta-!a$ers suis o 4uesion "onra"s enered ino$ he naiona# o+ern%en or o+ern%en(o,ned or "onro##ed"or!oraions a##eed#$ in "onra+enion o& he #a,.

. A a-!a$er is a##o,ed o sue ,here here is a "#ai%

ha !u#i" &unds are i##ea##$ disursed or ha !u#i" %one$ isein dee"ed o an$ i%!ro!er !ur!ose or ha here is a,asae o& !u#i" &unds hrouh he en&or"e%en o& an in+a#idor un"onsiuiona# #a,. 8A#a!a v. 0#dane,


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shall! effective *anuary 1! or 5ii national government deficit as apercentage of 0# of the previous year exceeds one and

one2half percent 51 C>$8Was there an invalid delegation of legislative power ?ANS)ER6 No. There is no undue de#eaion o&

#eis#ai+e !o,er u on#$ o& he dis"reion as o he e-e"uiono& he #a,. This is "onsiuiona##$ !er%issi#e.

:onress does no adi"ae is &un"ions or undu#$de#eae !o,er ,hen i des"ries ,ha /o %us e done ,ho%us do i and ,ha is he s"o!e o& his auhori$. n he ao+e"ase he Se"rear$ o& Ginan"e e"o%es %ere#$ he aen o&he #eis#ai+e de!ar%en o deer%ine and de"#are he e+enu!on ,hi"h is e-!ressed ,i## a*es !#a"e. The 'residen

"anno se aside he &indins o& he Se"rear$ o& Ginan"e ,hois no under he "ondiions a"in as he e-e"ue a#er eo orsuordinae. . A#a3ada Guro Part! ist (etc.$ v. 0rmita, etc., et al.,@ Se!e%er 1 200> and "o%!anion "ases "iin+arious "ases

3. T0! #&!) $& $a (0&-+ ! !!)*%(! &'+,%$0%' $0! $!))%$&)%a+ &-'a)%!( & $0! $a%'/ a-$0&)%$,. nheor$ i is on#$ ,ihin a saes errioria# oundaries ha asae "ou#d i+e !roe"ion hen"e i is on#$ ,ihin ha errior$ha i "ou#d de%and su!!or in he &or% o& a-es.

3. In par parem! non habet imperium$ As e,eene4ua#s here is no so+erein hen"e &orein so+ereins are noo e su/e" o he so+erein !o,er o& a-aion.

37. C&"%$, %( $0! )!(#!*$ a**&)! $& &$0!)(&!)!%/' 'a$%&'(. Thus !ro!eries o& oher so+erein naions,ihin he errior$ o& he a-in auhori$ shou#d no e su/e"o a-aion as a %easure o& res!e" o a "o(e4ua#.

48. G&!)'"!'$ !!"#$%&' (0&-+ ! )!*&/'%=! %'&)!) $& )!-*! $0! a"&-'$ & "&'!, $0! /&!)'"!'$ %(

0a'+%'/. There is +eri$ in he %a-i% Gor he o+ern%ene-e%!ion is he ru#e and a-aion is he e-"e!ion.3

41. S%$-( & $aa$%&' %( $0! #+a*! &) $0! a-$0&)%$,$0a$ 0a( $0! #&!) $& *&++!*$ $a!( . is !re%ised u!on hes$%ioi" re#aion e,een he a-!a$er and he Sae.

42. T0! #+a*! $0a$ /%!( #)&$!*$%&' %( $0! #+a*! $0a$0a( $0! )%/0$ $& !"a' $0a$ %$ ! (-##&)$! %' $0! &)" &$a!( (& %$ *&-+ *&'$%'-a++, /%! #)&$!*$%&'.

43. T0! (%$-( & )!a+ #)!)$, $a!( %( $0! #+a*!0!)! $0! #)!)$, %( +&*a$! !*a-(! %$ %( $0a$ #+a*! $0a$/%!( #)&$!*$%&'. T0! a##+%*a+! *&'*!#$ %( lex situs &) lexrei sitae$

44. T0! (%$-( & $aa$%&' & $a'/%+! #!)(&'a+#)!)$, %( $0! #+a*! 0!)! $0! &'!) %( +&*a$! e"ause iis ha !#a"e ha i+es !roe"ion o he o,ner ,hi"h !roe"ion

e-ends o he ani#e !ersona# !ro!er$. The a!!#i"a#e"on"e! is mo#ilia se6uuntur personam.

45. I'$a'/%+! #!)(&'a+ #)!)$, "a, 0a! &$a%'!a -(%'!(( (%$-( %' a #a)$%*-+a) #+a*! !!' % +&*a$!!+(!0!)!. Thus he di+idends earned &ro% do%esi""or!oraions are "onsidered as in"o%e &ro% ,ihin irres!e"i+e,here he shares o& so"* o& su"h do%esi" "or!oraion is#o"aed.

46. T0! (%$-( & %'*&"! $aa$%&' %( !$!)"%'! ,$0! 'a$%&'a+%$,: )!(%!'*! & $0! $a#a,!) a' (&-)*! &%'*&"!. '#ease re&er o enera# !rin"i!#es o& in"o%e a-aionunder in"o%e a-aion.

4. T0! (%$-( & !*%(! $a!( %( $0! #+a*! 0!)! $0!#)%%+!/! %( !!)*%(! !*a-(! %$ %( $0a$ #+a*! $0a$ /%!(#)&$!*$%&'.

4. T0! (%$-( & $)a'(!) $a!(: (-*0 a( !($a$! a'&'&)?( $a!(: %( !$!)"%'! , $0! 'a$%&'a+%$, a')!(%!'*! & $0! $a#a,!) a' $0! #+a*! 0!)! $0! #)!)$,%( +&*a$!. '#ease re&er o esae and donors a-es.

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47. T0! (%$-( & $aa$%&' & a *&'$)a*$ &) a #)&

58. *uliane a non2resident alien appointed asa commission agent by a domestic corporation with asales commission of 1=> all sales actually concluded andcollected through her efforts$ he local company withheldthe amount of #1=(!=== from her sales commission andremitted the same to the DI$

She filed a claim for refund alleging that her salescommission is not taxable because the same was a

compensation for her services rendered in 0ermany andtherefore considered as income from sources outside the#hilippines$

Is her contention correct ?ANS)ER6 es. The i%!oran &a"or ,hi"h deer%ines

he sour"e o& in"o%e o& !ersona# ser+i"es is no he residen"eo& he !a$or or he !#a"e ,here he "onra" &or ser+i"e isenered ino or he !#a"e o& !a$%en u he !#a"e ,here heser+i"es ,ere a"ua##$ !er&or%ed.

Sin"e he a"i+i$ o& se"urin he sa#es ,ere in 7?F 1=

S:RA @01 81?@>9 "ied in Baier/7ic3el$

52. DE:'! a foreign airline company whichdoes not maintain any flight to and from the #hilippinessold air tic)ets in the #hilippines! through a general salesagent! relating to the carriage of passengers and cargobetween two points! both outside the #hilippines$

Is DE:' sub,ect to income taxes on the sale of thetic)ets ?

ANS)ER6 es. The sour"e o& in"o%e ,hi"h is a-a#eis ha a"i+i$3 ,hi"h !rodu"ed he in"o%e. The 3sa#e o&i"*es3 in he 'hi#i!!ines is he a"i+i$ ha deer%ines ,hehersu"h in"o%e is a-a#e in he 'hi#i!!ines.

The i"*es e-"haned hands here and !a$%ens &or&ares ,ere a#so %ade here in 'hi#i!!ine "urren"$. The sius o&he sour"e o& !a$%ens is he 'hi#i!!ines. The o, o& ,ea#h!ro"eeded &ro% and o""urred ,ihin he 'hi#i!!ine errior$en/o$in he !roe"ion a""orded $ he 'hi#i!!ine


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ANS)ER6 The enera# or indire" "onsiuiona##i%iaions as ,e## as he s!e"i&i" or dire" "onsiuiona##i%iaions.

54. What are the general or indirectconstitutional limitations on the power of taxation ?

ANS)ER6 The enera# or indire" "onsiuiona#

#i%iaions are he &o##o,in6a. Due !ro"ess "#auseF. E4ua# !roe"ion "#auseF". Greedo% o& he !ressFd. Re#iious &reedo%Fe. No a*in o& !ri+ae !ro!er$ ,ihou /us

"o%!ensaionF&. Non(i%!air%en "#auseF. La,(%a*in !ro"ess6

19 Bi## shou#d e%ra"e on#$ one su/e" e-!ressedin he i#e

hereo&F29 Three 8=9 readins on hree se!arae da$sF=9 'rined "o!ies in &ina# &or% disriued hree 8=9

da$s e&ore!assae.

h. 'residenia# !o,er o ran re!rie+es "o%%uaionsand !ardons and re%ia# o& &ines and &or&eiure a&er "on+i"ion$ &ina# /ud%en.

55. The s!e"i&i" or dire" "onsiuiona# #i%iaionsare he &o##o,in6

a. No i%!rison%en &or non(!a$%en o& a !o## a-F. Ta-aion sha## e uni&or% and e4uia#eF". :onress sha## e+o#+e a !roressi+e s$se% o&

a-aionFd. A## a!!ro!riaion re+enue or ari&& i##s sha## oriinae

e-"#usi+e#$ in he House o& Re!resenai+es u he Senae%a$ !ro!ose and "on"ur ,ih a%end%ensF

e. The 'residen sha## ha+e he !o,er o +eo an$!ari"u#ar ie% or ie%s in an a!!ro!riaion re+enue or ari&&i## u he +eo sha## no a&&e" he ie% or ie%s o ,hi"h hedoes no o/e"F

&. De#eaed !o,er o& he 'residen o i%!ose ari&&raes i%!or and e-!or 4uoas onnae and ,har&ae dues6

19 De#eaion $ :onress29 Throuh a #a,=9 Su/e" o :onressiona# #i%is and resri"ions9 )ihin he &ra%e,or* o& naiona# de+e#o!%en

!rora%.

. Ta- e-e%!ion o& "haria#e insiuions "hur"hes!arsonaes and "on+ens a!!urenan hereo %os4ues anda## #ands ui#dins and i%!ro+e%ens o& a## *inds a"ua##$dire"#$ and e-"#usi+e#$ used &or re#iious "haria#e oredu"aiona# !ur!osesF

h. No a- e-e%!ion ,ihou he "on"urren"e o& %a/ori$+oe o& a## %e%ers o& :onressF

i. No use o& !u#i" %one$ or !ro!er$ &or re#iious!ur!oses e-"e! i& !ries is assined o he ar%ed &or"es!ena# insiuions o+ern%en or!hanae or #e!rosariu%F

/. Mone$ "o##e"ed on a- #e+ied &or a s!e"ia# !ur!ose o

e used on#$ &or su"h !ur!ose a#an"e i& an$ o enera#&undsF

*. The Su!re%e :ours !o,er o re+ie, /ud%ens ororders o& #o,er "ours in a## "ases in+o#+in he #ea#i$ o& an$a- i%!ose assess%en or o## or he #ea#i$ o& an$ !ena#$i%!osed in re#aion o he ao+eF

#. Auhori$ o& #o"a# o+ern%en unis o "reae heir o,nsour"es o& re+enue o #e+$ a-es &ees and oher "haressu/e" o uide#ines and #i%iaions i%!osed $ :onress"onsisen ,ih he asi" !o#i"$ o& #o"a# auono%$F

%. Auo%ai" re#ease o& #o"a# o+ern%ens /us share in

naiona# a-esFn. Ta- e-e%!ion o& a## re+enues and asses o& non(

so"* non(!ro&i edu"aiona# insiuions used a"ua##$ dire"#$and e-"#usi+e#$ &or edu"aiona# !ur!osesF

o. Ta- e-e%!ion o& a## re+enues and asses o&!ro!riear$ or "oo!erai+e edu"aiona# insiuions su/e" o#i%iaions !ro+ided $ #a, in"#udin resri"ions on di+idendsand !ro+isions &or rein+es%en o& !ro&isF

!. Ta- e-e%!ion o& rans endo,%ens donaions or"onriuions used a"ua##$ dire"#$ and e-"#usi+e#$ &oredu"aiona# !ur!oses su/e" o "ondiions !res"ried $ #a,.

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56. E@-a+ #)&$!*$%&' & $0! +a *+a-(! %( (-

5. C+a((%%*a$%&': $& ! a+%: "-($ 8a9 res onsusania# disin"ions 89 e er%ane o he !ur!ose o& he#a, 8"9 no e #i%ied o e-isin "ondiions on#$ and 8d9 a!!#$e4ua##$ o a## %e%ers o& he sa%e "#ass. (Tiu, et al., v. Court of

Appeals, et al., "iin Tanada v. Angara, Ma$ 21??7 272 S:RA 19

61. A +!/%(+a$%! )-+! 0%*0 %( %' $0! 'a$-)! &(-&)%'a$! +!/%(+a$%&': !(%/'! $& %"#+!"!'$ a #)%"a),+!/%(+a$%&' , #)&%%'/ $0! !$a%+( $0!)!&. n he sa%e ,a$ha #a,s %us ha+e he ene&i o& !u#i" hearin i is enera##$re4uired ha e&ore a #eis#ai+e ru#e is ado!ed here %us e

a hearin and !u#i"aion as re4uired under he Ad%inisrai+e:ode. (Commissioner of Internal Revenue v. Court of Appeals, etal. 2@1 S:RA 2=@ 9

62. I' *a(! & a' %'$!)#)!$a$%! )-+! '& 0!a)%'/ &)#-+%*a$%&' %( )!@-%)! (%'*! a' %'$!)#)!$a$%! )-+! %(!(%/'! "!)!+, $& #)&%! /-%!+%'!( & $0! +a 0%*0 $0!a"%'%($)a$%! a/!'*, %( %' *0a)/! & !'&)*%'/.5Commissioner of Internal Revenue v. Court of Appeals, et al., 2@1S:RA 2=@ 9

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63. E@-a+%$, a' -'%&)"%$, & $aa$%&' "a, "!a' $0!(a"! a( !@-a+ #)&$!*$%&'. n su"h a "ase he er%s ,ou#d%ean ha a## su/e"s and o/e"s o& a-aion ,hi"h aresi%i#ar#$ siuaed sha## e su/e" o he sa%e urdens andraned he sa%e !ri+i#ees ,ihou an$ dis"ri%inaion,hasoe+er.

64. U'%&)"%$, "a, 0a! a )!($)%*$%! "!a'%'/%!)!'$ )&" !@-a+%$, a' !@-a+ #)&$!*$%&'. ,ou#d %eanhen ha he sa%e rae sha## e i%!osed &or he sa%e su/e"sand o/e"s ,ihin he errioria# oundaries o& a a-inauhori$.

65. A $)%a+ *&-)$ %( '&$ $0! #)!) &)-" &) $0!!'$%+a$%&' & $0! %((-!( 0!)! %$ %( $0! +!/%(+a$-)! $& 0%*0)!+%! "-($ ! (&-/0$:e"ause ,ih he #eis#aure !ri%ari#$#ies he dis"reion o deer%ine 8a9 he naure 8*ind9 89 o/e"8!ur!ose9 8"9 e-en 8rae9 8d9 "o+erae 8su/e"s9 and 8e9

situs8!#a"e9 o& a-aion. 8Commissioner of Internal Revenue, et al.,v. 'antos, et al., 277 S:RA @179

66. I$ %( %'0!)!'$ %' $0! #&!) $& $a $0a$ $0! S$a$! !)!! $& (!+!*$ $0! (-

6. : fixed annual license fee on those engaged inthe business of general enterprise was also imposed on

the sale of bibles by a religious sect$ Is this valid orviolative of the constitutionally guaranteed freedom ofreligion ?

ANS)ER6 is no +a#id e"ause i +io#aes he"onsiuiona##$ uaraneed &reedo% o& re#iion. As a #i"ense&ee is &i-ed in a%oun and unre#aed o he re"ei!s o& hea-!a$er su"h a #i"ense &ee ,hen a!!#ied o a re#iious se" isa"ua##$ i%!osed as a "ondiion &or he &ree e-er"ise o& re#iion.A #i"ense &ee resrains in ad+an"e hose "onsiuiona# #ierieso& !ress and re#iion and ine+ia#$ ends o su!!ress heire-er"ise.3

6. A)$%*+! XII: S!*. 11 & $0! C&'($%$-$%&' #)&%!($0a$ $0! /)a'$ & a )a'*0%(! &) $0! !)a$%&' & a #-+%*-$%+%$, %( (-? Ma$ > 1???9

1. T0! $a !!"#$%&': %'!($"!'$( %'*!'$%!(a' $0! +%! /)a'$! , C&'/)!(( -'!) S!*$%&' 12 & R.A.N&. 22: )!!) &'+, $& $0! S-%* SE. T0!)! %( '& !#)!((!$!'(%&' & $0! a&)!(a% !'!%$( $& &$0!) SE( ($%++ $& !*)!a$! a$ $0! $%"! %a #)!(%!'$%a+ #)&*+a"a$%&'.

Thus 'ro"#a%aion No. 20 ,hi"h a#so %a*es a+ai#a#eo he 5ohn Ha$ SEJ ene&is e-isin in oher #a,s su"h as he!ri+i#ee o& e-!or !ro"essin Cone(ased usinesses o&

11


12/95

i%!orin "a!ia# e4ui!%en and ra, %aeria#s &ree &ro% a-esduies and oher resri"ionsF a- and du$ e-e%!ions a-ho#ida$ a- "redi and oher in"eni+es under he O%niusn+es%ens :ode o& 1?7 and he a!!#i"ai#i$ o he 5ohnHa$ SEJ o& ru#es o+ernin &orein in+es%ens in he'hi#i!!ines &inds no su!!or under R.A. No. 7227. is i##ea#.

'ro"#a%aion No. 20 ,ou#d "ir"u%+en he

:onsiuions i%!osiion ha a #a, ranin an$ a- e-e%!ion%us ha+e he "on"urren"e o& a %a/ori$ o& a## he %e%ers o&:onress. n he sa%e +ein he oher *inds o& !ri+i#eese-ended o he 5ohn Ha$ SEJ are $ radiion and usae &or:onress o #eis#ae u!on. 82ohn %a! People5s AlternativeCoalition, et al., v. im, etc., et al., O"oer 2200=9

2. U'!) $0! '& #)!a%+%'/ C&'($%$-$%&': 0!)!

$0!)! %( '!%$0!) a /)a'$ '&) #)&0%%$%&' , ($a$-$!: $0!$a%'/ #&!) & +&*a+ /&!)'"!'$( "-($ ! !!"! $&

!%($ a+$0&-/0 C&'/)!(( "a, #)&%! ($a$-$&), +%"%$a$%&'(a' /-%!+%'!( in order o sa&euard he +iai#i$ and se#&(su&&i"ien"$ o& #o"a# o+ern%en unis $ dire"#$ ranin he%enera# and road a- !o,ers. 8Cit! Government of 'an Pa#lo,aguna, et al., v. Re!es, et al.,


13/95


14/95

". A##o,in &orein a-es as a dedu"ion &ro% rossin"o%e.

5. Ta *)!%$ enera##$ re&ers o an a%oun ha issura"ed dire"#$ &ro% ones oa# a- #iai#i$ an a##o,an"eaains he a- ise#& or a dedu"ion &ro% ,ha is o,ned.

A a- "redi redu"es he a- due in"#udin I,hene+er

a!!#i"a#e I he in"o%e a- ha is deer%ined a&er a!!#$inhe "orres!ondin a- raes o a-a#e in"o%e. 8Commissionerof Internal Revenue v. Central u)on "rug Corporation, ?@7 A!ri# 1> 200>9

6. A $a !-*$%&' is de&ined as a sura"ion &roin"o%e &or a- !ur!oses or an a%oun ha is a##o,ed $ #a, oredu"e in"o%e !rior o he a!!#i"aion o& he a- rae o"o%!ue he a%oun o& a- ,hi"h is due.

A a- dedu"ion redu"es he in"o%e ha is su/e" o a-in order o arri+e a a-a#e in"o%e. 8Commissioner of InternalRevenue v. Central u)on "rug Corporation, ?@7 A!ri#1> 200>9

. P-)#&(! & $a $)!a$%!(. To re"on"i#e he naiona#&is"a# #eis#aion o& he "onra"in !aries in order o he#! hea-!a$er a+oid si%u#aneous a-aion in ,o di&&eren/urisdi"ions. More !re"ise#$ he a- "on+enions are dra&ed,ih a +ie, o,ards he e#i%inaion o& inernaiona# /uridi"a#dou#e a-aion. (Commissioner of Internal Revenue v. '.C.2ohnson and 'on, Inc., et al. 5une 2> 1???9

. Ra$%&'a+! &) a&%%'/ %'$!)'a$%&'a+ > Auus 2> 1?? 2=>S:RA @=0

NOTES AND :OMMENTS6a. I$ %( %$0%' $0! #&!) & a *&'!)!'*! *&""%$$!!

$& %'*+-! %' %$( )!#&)$ a' !'$%)!+, '! #)&%(%&' $0a$ %( '&$&-' !%$0!) %' $0! H&-(! %++ &) S!'a$! %++. & he "o%%iee"an !ro!ose an a%endin "onsisin o& one or ,o !ro+isions here isno reason ,h$ i "anno !ro!ose se+era# !ro+isions "o##e"i+e#$"onsidered as an a%end%en in he naure o& a susiue3 so #onas su"h a%end%en is er%ane o he su/e" o& he i##s e&ore he"o%%iee. A&er a## is re!or ,as no &ina# u needed he a!!ro+a#o& oh houses o& :onress o e"o%e +a#id as an a" o& he#eis#ai+e de!ar%en. The "hare ha in his "ase he :on&eren"e:o%%iee a"ed as a hird #eis#ai+e "ha%er is hus ,ihou an$asis. A#a3ada Guro Part! ist (etc.$ v. 0rmita, etc., et al., @ Se!e%er 1 200> and "o%!anion "ases "iin Tolentino v.

14


15/95

'ecretar! of -inance, et al., >> Auus 2> 1??2=>S:RA @=0

. T0! C&'($%$-$%&' )!@-%)!( $0a$ a++ )!!'-! %++((0a++ &)%/%'a$! !*+-(%!+, )&" $0! H&-(! &R!#)!(!'$a$%!(. The :onsiuion si%!#$ %eans ha he iniiai+e&or &i#in re+enue ari&& or a- i##s %us "o%e &ro% he House o&Re!resenai+es on he heor$ ha e#e"ed as he$ are &ro% hedisri"s he Me%ers o& he House "an e e-!e"ed o e %oresensii+e o he #o"a# needs and !ro#e%s. (Tolentino v. 'ecretar! of-inance and companion cases, :and "o%!anion "ases "iin Tolentino v. 'ecretar! of -inance, et al.,>> Auus 2> 1?? 2=>S:RA @=0

e. Ra$%&'a+! &) $0! 9&)%/%'a$%&' )-+!.; E#e"ed &ro%he disri"s he %e%ers o& he House "an e e-!e"ed o e %oresensii+e o he #o"a# needs and !ro#e%s. On he oher hand hesenaors ,ho are e#e"ed a #are are e-!e"ed o a!!roa"h hesa%e !ro#e%s &ro% he naiona# !ers!e"i+e. Boh +ie,s are here$%ade o ear on he ena"%en o& su"h #a,s. . A#a3ada Guro Part!ist (etc.$ v. 0rmita, etc., et al., @ Se!e%er 1 200>and "o%!anion "ases "iin Tolentino v. 'ecretar! of -inance, et al.,>> Auus 2> 1?? 2=>S:RA @=0

is he %ain !ur!ose o& he i##s e%anain &ro% he House o&Re!resenai+es o rin in siCea#e re+enues &or he o+ern%en osu!!#e%en our "ounr$s serious &inan"ia# !ro#e%s and i%!ro+e a-

ad%inisraion and "onro# o& he #ea*aes in re+enue &ro% in"o%e

a-es and +a#ue(added a-es. As hese house i##s ,ere rans%iedo he Senae he #aer a!!roa"hin he %easure &ro% he !oin o&naiona# !ers!e"i+e "an inrodu"e a%end%ens ,ihin he !ur!oseso& hese i##s "an !ro+ide &or ,a$s ha ,ou#d so&en he i%!a" o&he VAT %easure on he "onsu%er i.e. $ disriuin he urdena"ross a## se"ors insead o& !uin i enire#$ on he shou#ders o& he"onsu%ers. A#a3ada Guro Part! ist (etc.$ v. 0rmita, etc., et al., @ Se!e%er 1 200> and "o%!anion "ases

&. N&) &!( $0! C&'($%$-$%&' #)&0%%$ $0! %+%'/ %'$0! S!'a$! & a (-($%$-$! %++ %' a'$%*%#a$%&' & %$( )!*!%#$ &$0! %++ )&" $0! H&-(!:so #on as a"ion $ he Senae as a od$is ,ihhe#d !endin re"ei! o& he House i##. 8Oier in Tolentino v.'ecretar! of -inance and companion cases,2=> S:RA @=09

75. It is contended that where the Dicameral'onference 'ommittee was allowed to add or delete

provisions in the Fouse Dill and Senate Dill after these hadpassed three readings constitutes a circumvention of the7no amendment rule8 of :rticle I$ Sec$ >

Auus 2> 1?? 2=>S:RA @=0

76. he : is assailed as being regressive andtherefore violative of the mandate to evolve a progressivesystem of taxation$ o you agree ? 3xplain your answer$

S;


16/95

a-aion. Oher,ise sa#es a-es ,hi"h !erha!s are he o#des&or% o& indire" a-es ,ou#d ha+e een !rohiied ,ih he!ro"#a%aion o& he "onsiuiona# !ro+ision. Sa#es a-es area#so reressi+e. . A#a3ada Guro Part! ist (etc.$ v. 0rmita, etc., etal., @ Se!e%er 1 200> and "o%!anion "ases "iinTolentino v. 'ecretar! of -inance, et al., >> Auus 2>1?? 2=> S:RA @=0

NOTES AND :OMMENTS6a. T0! C&'($%$-$%&' &!( '&$ )!a++, #)&0%%$

$0! %"#&(%$%&' & %'%)!*$ $a!( 0%*0: +%! $0! VAT: a)!)!/)!((%!. The "onsiuiona# !ro+ision %eans si%!#$ ha indire"a-es shou#d e %ini%iCed.

Resor o indire" a-es shou#d e %ini%iCed u no a+oidedenire#$ e"ause i is di&&i"u# i& no i%!ossi#e o a+oid i%!osin su"ha-es a""ordin o he a-!a$ers ai#i$ o !a$. . A#a3ada GuroPart! ist (etc.$ v. 0rmita, etc., et al., @ Se!e%er 1200> and "o%!anion "ases "iin Tolentino v. 'ecretar! of -inance, etal., >> Auus 2> 1?? 2=> S:RA @=0

. I' $0! *a(! & VAT: $0! +a "%'%"%=!( $0!

)!/)!((%! !!*$( & $0%( %"#&(%$%&' , #)&%%'/ &) =!)&)a$%'/ & *!)$a%' $)a'(a*$%&'( 0%+! /)a'$%'/ !!"#$%&'( $&&$0!) $)a'(a*$%&'(. The ransa"ions ,hi"h are su/e" o VAT arehose ,hi"h in+o#+e oods and ser+i"es ,hi"h are used or a+ai#ed o&%ain#$ $ hiher in"o%e rou!s. Li*e,ise he VAT rae o& 0 or 108or 129 does no a!!#$ o sa#e o& oods or ser+i"es ,ih ross annua#sa#es or re"ei!s no e-"eedin'1>00000.00. A#so asi" %arine andari"u#ura# !rodu"s in heir oriina# sae are si## no su/e" o a-hus ensurin ha !ro"ess a he rass roos #e+e# ,i## re%aina""essi#e. A#a3ada Guro Part! ist (etc.$ v. 0rmita, etc., et al., @ Se!e%er 1 200> and "o%!anion "ases "iin1apatiran ng ga 7agliling3od sa Pamahalaan ng Pilipinas, Inc. v.

Tan, No.L(1=11 5une =0 1? 1@= S:RA =71 ==9

77. 9T0! P)!(%!'$ (0a++ 0a! $0! #&!) $& !$& a',#a)$%*-+a) %$!" &) %$!"( %' a' a##))%a$%&': )!!'-!: &)$a)% %++: -$ $0! !$& (0a++ '&$ a!*$ $0! %$!" &) %$!"( $&0%*0 0! &!( '&$ &

188. An ie%3 in a re+enue i## does no re&er o anenire se"ion i%!osin a !ari"u#ar *ind o& a- u raher o hesu/e" o& he a- and he a- rae. n he !orion o& a re+enuei## ,hi"h a"ua##$ i%!oses a a- a se"ion ideni&ies he a-

and enu%eraes he !ersons #ia#e here&ore ,ih he"orres!ondin a- rae.

To "onsrue he ,ord ie%3 as re&errin o he ,ho#ese"ion ,ou#d ie he 'residens hand in "hoosin eiher oa!!ro+e he ,ho#e se"ion a he e-!ense o& a#so a!!ro+in a!ro+ision herein ,hi"h he dee%s una""e!a#e or +eo heenire se"ion a he e-!ense o& &oreoin he "o##e"ion o& he

*ind o& a- a#oeher.

181. C0a)%$a+! %'($%$-$%&'(: *0-)*0!( a'#a)(&'a/!( &) *&'!'$( a##-)$!'a'$ $0!)!$&: "&(@-!(:'&'#)&%$ *!"!$!)%!(: a' a++ +a'(: -%+%'/( a'%"#)&!"!'$( $0a$ a)! a*$-a++,: %)!*$+, a' !*+-(%!+,-(! &) )!+%/%&-(: *0a)%$a+! &) !-*a$%&'a+ #-)#&(!( a)!!!"#$ )&" $aa$%&'. Se".2 8=9 Ari"#e V 1?7 :onsiuion

182. T0! *&'($%$-$%&'a+ $a !!"#$%&'( )!!)&'+, $& )!a+ #)!)$,ha are a"ua##$ dire"#$ and e-"#usi+e#$

used &or re#iious "haria#e or edu"aiona# !ur!oses and hahe on#$ "onsiuiona##$ re"oniCed e-e%!ion &ro% a-aion o&re+enues are hose earned $ non(!ro&i non(so"*edu"aiona# insiuions ,hi"h are a"ua##$ dire"#$ ande-"#usi+e#$ used &or edu"aiona# !ur!oses. (Commissioner ofInternal Revenue v. Court of Appeals, et al., 2? S:RA =9

The "onsiuiona# a- e-e%!ion "o+ers !ro!er$ a-eson#$. )ha is e-e%!ed is no he insiuion ise#& hosee-e%!ed &ro% rea# esae a-es are #ands ui#dins andi%!ro+e%ens a"ua##$ dire"#$ and e-"#usi+e#$ used &orre#iious "haria#e or edu"aiona# !ur!oses. 8ung Center of

the Philippines v. ue)on Cit!, et al., etc.,


17/95

184. W0a$ %( "!a'$ , 9a*$-a+: %)!*$ a'!*+-(%! -(!; & $0! #)!)$, &) *0a)%$a+! #-)#&(!( %($0! %)!*$ a' %""!%a$! a' a*$-a+ a##+%*a$%&' & $0!#)!)$, %$(!+ o he !ur!oses &or ,hi"h he "haria#einsiuion is oraniCed. is no he use o& he in"o%e &ro% herea# !ro!er$ ha is deer%inai+e o& ,heher he !ro!er$ is

used &or a-(e-e%! !ur!oses.& rea# !ro!er$ is used &or one or %ore "o%%er"ia#

!ur!oses i is no e-"#usi+e#$ used &or he e-e%!ed !ur!oseu is su/e" o a-aion. The ,ords do%inan use3 or!rin"i!a# use3 "anno e susiued &or he ,ords usede-"#usi+e#$3 ,ihou doin +io#en"e o he :onsiuion and he#a,. So#e#$ is s$non$%ous ,ih e-"#usi+e#$. 8ung Center of thePhilippines v. ue)on Cit!, et al., etc.,

"oo!erai+es.187. T0! NIRC )!*&/'%=!( $0! !!"#$%&' )&" $a &

$0! %'*&"!( & *%%* +!a/-!( &) &)/a'%=a$%&'( '&$&)/a'%=! &) #)&%$ u o!eraed e-"#usi+e#$ &or he !ro%oiono& so"ia# ,e#&are as ,e## as "#us oraniCed and o!eraede-"#usi+e#$ &or !#easure re"reaion and oher non(!ro&ia#e!ur!oses ,here no !ar o& he ne in"o%e inures o he ene&io& an$ !ri+ae so"*ho#der or %e%er.

118. The a- e-e%!ion so re"oniCed does no o, oin"o%e o& ,hae+er *ind and "hara"er o& he &oreoin

oraniCaions &ro% an$ o& heir !ro!eries rea# or !ersona# or&ro% an$ o& heir a"i+iies "ondu"ed &or !ro&i reard#ess o&he dis!osiion %ade o& su"h in"o%e ,hi"h sha## e su/e" oin"o%e a-es. (Commissioner of Internal Revenue v. Court of

Appeals, et al., 2? S:RA =9

112. What is a tax amnesty ?S;


18/95

111. istinguish tax amnesty from tax exemption.S;; Ind. :?, >@70 >@$

. Ta- a%nes$ a!!#ies on#$ o !as a- !eriods hen"eo& reroa"i+e a!!#i"aion (Castaneda, supra9 )HLE a-e-e%!ion has !ros!e"i+e a!!#i"aion.

114. efine tax avoidance and tax evasion$S;


19/95


20/95

:ir"u#ar No. 7(?1 "#assi&$in "o!ra as an ari"u#ura# non(&oodie% de"#arin i e-e%! &ro% VAT on#$ i& he sa#e is %ade $he !ri%ar$ !rodu"er. 8isamis Oriental Association of CocoTraders, Inc. v. "epartment of -inance 'ecretar!, et al., 2= S:RA @=1??

6. Leis#ai+e ru#es are in he naure o& suordinae

#eis#aion desined o i%!#e%en a !ri%ar$ #eis#aion $!ro+idin he deai#s hereo&. The$ are issued under he 4uasi(#eis#ai+e auhori$ o& he BR :o%%issioner. There is are4uire%en &or noi"e hearin and !u#i"aion. ##usraion6Re+enue Me%orandu% :ir"u#ar No. =7(?= ,hi"h !#a"ed Ho!eLu-ur$ 're%iu% More and :ha%!ion "iarees ,ihin hes"o!e o& he a%endaor$ #a, R.A. No. 7@> and su/e"edhe% o he in"reased a- rae re4uires noi"e hearin and!u#i"aion. (Commissioner of Internal Revenue v. Court of Appeals,et al., 2@1 S:RA 2=@9

. The ru#ins and "ir"u#ars !ro%u#aed $ he

:o%%issioner do no ha+e reroa"i+e a!!#i"aion i& here+o"aion %odi&i"aion or re+ersa# ,ou#d e !re/udi"ia# o hea-!a$ers. ('ec. :>79

. nsan"es ,hen re+enue ru#ins and reu#aionsha+e reroa"i+e e&&e" e+en i& !re/udi"ia# o he a-!a$er6

a. )here he a-!a$er de#ierae#$ %issaes or o%is%aeria# &a"s &ro% his reurn or in an$ do"u%en re4uired o&hi% $ he BRF

. )here he &a"s suse4uen#$ ahered $ he BR

are %aeria##$ di&&eren &ro% he &a"s on ,hi"h he ru#in isased or

". )here he a-!a$er a"ed in ad &aih. 8Se". 2@NR: o& 1??79

7. The :o%%issioner or his auhoriCed re!resenai+eis e%!o,ered o sus!end he usiness o!eraions ande%!orari#$ "#ose he usiness esa#ish%en o& an$ !erson &oran$ o& he &o##o,in +io#aions6

a. n "ase o& a VAT(reisered !erson619 Gai#ure o issue re"ei!s or in+oi"esF

29 Gai#ure o &i#e a VAT reurn as re4uired underhe Ta- :odeF

=9 ;ndersae%en o& a-a#e sa#es or re"ei!s$ =0 or %ore o& his "orre" a-a#e sa#es or re"ei!s&or he a-a#e 4uarer.. Gai#ure o reiser under he VAT !ro+isions o& he

Ta- :ode.

The e%!orar$ "#osure o& he esa#ish%en sha## &or heduraion o& no #ess han &i+e 8>9 da$s and sha## e #i&ed on#$u!on "o%!#ian"e ,ih ,hae+er re4uire%ens !res"ried $ he:o%%issioner in he "#osure order. (Atlas Consolidated ining *"evelopment Corporation v. Commissioner of Internal Revenue, 00000.00 or #ess and %inor "ri%ina# +io#aions as %a$ edeer%ined $ ru#es and reu#aions o e !ro%u#aed $ heSe"rear$ o& Ginan"e u!on he re"o%%endaion o& he:o%%issioner dis"o+ered $ reiona# and disri" o&&i"ia#s %a$e "o%!ro%ised $ a reiona# e+a#uaion oard ,hi"h sha## e"o%!osed o& he Reiona# Dire"or as :hair%an he AssisanReiona# Dire"or heads o& he Lea# Assess%en and:o##e"ion Di+isions and he Re+enue Disri" O&&i"er ha+in/urisdi"ion o+er he a-!a$er as %e%ersF and

d. The !o,er o assin or reassin inerna# re+enueo&&i"ers o esa#ish%ens ,here ari"#es su/e" o e-"ise a-

20


21/95

are !rodu"ed or *e!. 8Se". 7 NR: o& 1??7 "ied in Repu#lic ofthe Philippines, etc. v. %i)on, G.R. 7o. 9>==, "ecem#er 9>, 99

12. The :o%%issioner o& nerna# Re+enue has he!o,er o oain on a reu#ar asis &ro% an$ !erson oher hanhe !erson ,hose inerna# re+enue a- #iai#i$ is su/e" oaudi or in+esiaion an in&or%aion su"h as u no #i%ied o

"oss and +o#u%e o& !rodu"ion re"ei!s or sa#es and rossin"o%e a-!a$ers a%on ohers. Se". > 8B9 NR: o& 1??7

13. Re!. A" No. 10> he Ban* De!osis Se"re"$La, !rohiis in4uir$ ino an* de!osis. As e-"e!ions o Re!.A" No. 10> he :o%%issioner o& nerna# Re+enue is on#$auhoriCed o in4uire ino he an* de!osis o&6

a. a de"eden o deer%ine his ross esaeF and. an$ a-!a$er ,ho has &i#ed an a!!#i"aion &or

"o%!ro%ise o& his a- #iai#i$ $ reason o& &inan"ia# in"a!a"i$o !a$ his a- #iai#i$. Se". > 8G9 NR: o& 1??7

". A a-!a$er ,ho auhoriCes he :o%%issioner oin4uire ino his an* de!osis.

INCO>E TAXATION

1. The Ta- :ode has in"#uded under he er%"or!oraion3 !arnershi!s no %aer ho, "reaed ororaniCed /oin(so"* "o%!anies /oin a""ouns 8cuentas enparticipacion9 asso"iaions or insuran"e "o%!anies. Se". 2no, Se". 2 8B9 o& he NR: o& 1??7

2. n 0vangelista v. Collector, 9=: Phil. 9


22/95

use i &or !ur!ose o& %a*in ains and he$ %a$ ,ihoue"o%in !arners are a%on he%se#+es as o he%anae%en and use o& su"h !ro!er$ and he a!!#i"aion o&he !ro"eeds here&ro%.. 8'purloc3 v,. Hilson, 9 7.0. @;>, :>> ass. >


23/95

de i is a i& &ro% he "redior o he deor and need no ein"#uded in he #aers in"o%e.

28. & a "or!oraion o ,hi"h a so"*ho#der is indeed&ori+es he de he ransa"ion has he e&&e" o& !a$%en o&a di+idend. 8Se". >0 Re+. Res. No. 29

21. The ;'CRA >:>9$

22. The S"hedu#ar s$se% o& in"o%e a-aion is as$se% e%!#o$ed ,here he in"o%e a- rea%en +aries and is%ade o de!end on he *ind or "aeor$ o& a-a#e in"o%e o&he a-!a$er. (Tan v. del Rosario, 2r., :>; 'CRA >:>9$

23. ;nder he Naiona# nerna# Re+enue :ode he#oa# s$se% is a!!#i"a#e o a-a#e "or!oraions and hes"hedu#ar o indi+idua#s.

24. The enera# !rin"i!#es o& in"o%e a-aion in he

'hi#i!!ines OR he sius o& in"o%e a-aion in he 'hi#i!!inesOR he sour"e ru#e o& in"o%e a-aion as a!!#ied in he'hi#i!!ines.

a. A "iiCen o& he 'hi#i!!ines residin herein is a-a#eon a## in"o%e deri+ed &ro% sour"es ,ihin and ,ihou he'hi#i!!ines.

. A nonresiden "iiCen is a-a#e on#$ on in"o%ederi+ed &ro% sour"es ,ihin he 'hi#i!!ines.". An indi+idua# "iiCen o& he 'hi#i!!ines ,ho is ,or*in

and deri+in in"o%e &ro% aroad as an o+erseas "onra",or*er is a-a#e on#$ on in"o%e &ro% sour"es ,ihin he'hi#i!!ines6 'ro+ided Tha a sea%an ,ho is a "iiCen o& he'hi#i!!ines and ,ho re"ei+es "o%!ensaion &or ser+i"esrendered aroad as a %e%er o& he "o%!#e%en o& a +esse#enaed e-"#usi+e#$ in inernaiona# rade sha## e reaed asan o+erseas "onra" ,or*er.

d. An a#ien indi+idua# ,heher residen or no o& he'hi#i!!ines is a-a#e on#$ on in"o%e deri+ed &ro% sour"es,ihin he 'hi#i!!ines.

e. A do%esi" "or!oraion is a-a#e on a## in"o%ederi+ed &ro% sour"es ,ihin and ,ihou he 'hi#i!!ines.

&. A &orein "or!oraion ,heher enaed or no in radeor usiness in he 'hi#i!!ines is a-a#e on#$ on in"o%e

deri+ed &ro% sour"es ,ihin he 'hi#i!!ines. 8Se". 2= NR: o&1??79

25. :o%!ensaion in"o%e is "onsidered as ha+ineen earned in he !#a"e ,here he ser+i"e ,as rendered andno "onsidered as sour"ed &ro% he !#a"e o& oriin o& he%one$.

26. 'a$%en &or ser+i"es oher han "o%!ensaion

in"o%e is "onsidered as ha+in een earned a he !#a"e,here he a"i+i$ or ser+i"e ,as !er&or%ed.

2. A non(residen a#ien ,ho has sa$ed in he'hi#i!!ines &or an areae !eriod o& %ore han 10 da$sdurin he "a#endar $ear 2001 sha## e "onsidered as a non(residen a#ien doin usiness in he 'hi#i!!ines. :onse4uen#$he sha## e su/e" o in"o%e a- on his in"o%e deri+ed &ro%sour"es &ro% ,ihin he 'hi#i!!ines. Se". 2> 8A9 819 NR:

He is a##o,ed o a+ai# o& he ie%iCed dedu"ionsin"#udin he !ersona# and addiiona# e-e%!ions su/e" o heru#e on re"i!ro"i$.

2. %!ro!er#$ a""u%u#aed earnins are he earninsor !ro&is o& a "or!oraion ,hi"h are !er%ied o a""u%u#aeinsead o& ein di+ided $ a "or!oraion o is shareho#ders &orhe !ur!ose o& a+oidin he in"o%e a- on di+idends ,ihres!e" o is shareho#ders or he shareho#ders o& anoher"or!oraion. & he in"o%e ,ere di+ided and disriued he$,ou#d ha+e een a-ed as di+idends.

27. n addiion o oher in"o%e a-es here is i%!osed&or ea"h a-a#e $ear on he i%!ro!er#$ a""u%u#aed a-a#ein"o%e o& ea"h "or!oraion an i%!ro!er#$ a""u%u#aed

23


24/95

earnins a- e4ua# o 10 o& he i%!ro!er#$ a""u%u#aeda-a#e in"o%e. Se". 2? 8A9 NR: o& 1??7

38. E+er$ "or!oraion &or%ed or a+ai#ed &or he!ur!ose o& a+oidin in"o%e a- ,ih res!e" o is shareho#dersor he shareho#ders o& anoher "or!oraion $ !er%iinearnins and !ro&is o a""u%u#ae insead o& ein di+ided or

disriued. Se". 2? 8B9 819 NR: o& 1??7

31. :or!oraions e-e%! &ro% he i%!ro!er#$a""u%u#aed earnins a-6

a. 'u#i"#$(he#d "or!oraionsF. Ban*s and oher nonan* &inan"ia# iner%ediariesF

and". nsuran"e "o%!anies. Se". 2? 8B9 829 NR: o& 1??7

32. The &a" ha he earnins or !ro&is o& a "or!oraionare !er%ied o a""u%u#aed e$ond he reasona#e needs o&he usiness sha## e deer%inai+e o& he !ur!ose o a+oid hea- u!on is shareho#ders or %e%ers un#ess he "or!oraion$ "#ear !re!onderan"e o& e+iden"e sha## !ro+e he "onrar$.Se". 2? 8:9 829 NR: o& 1??7

33. Reasona#e needs o& usiness in"#udes hereasona#$ ani"i!aed needs o& he usiness. Se". 2? 8E9NR: o& 1??7

n order o deer%ine ,heher !ro&is are a""u%u#aed &orhe reasona#e needs o& he usiness o a+oid he sura- u!onshareho#ders i %us e sho,n ha he "onro##in inenion o&he a-!a$er is %ani&esed a he i%e o& he a""u%u#aion no

inenions de"#ared suse4uen#$ ,hi"h are %erea&erhouhs. Gurher%ore he a""u%u#aed !ro&is %us eused ,ihin a reasona#e i%e a&er he "#ose o& he a-a#e$ear. (C!anamid Philippines, Inc. v. Court of Appeals, et al.,


25/95

Appeals, et al., G.R. 7o. 9=?=@;, 2anuar! :=, :==="iin anilaHine erchants, Inc. v. Commissioner of Internal Revenue in urn"iin Merens9

48. The ,o 829 !rin"i!a# a""ounin %ehods &orre"oniion o& in"o%e are he 8a9 a""rua# %ehodF and he 89"ash %ehod.

41. U'!) $0! a**)-a+ "!$0&o& a""ounin in"o%eis re!ora#e ,hen a## he e+ens ha+e o""urred ha &i- hea-!a$ers rih o re"ei+e he in"o%e and he a%oun "an edeer%ined ,ih reasona#e a""ura"$. Thus i is he rih ore"ei+e in"o%e and no he a"ua# re"ei! ha deer%ines,hen o in"#ude he a%oun in ross in"o%e. (-ilipinas -i#erCorporation v. Court of Appeals, et al., G.R. 7os. 99?


26/95

a. )hen he &rine ene&i is re4uired $ he naure o&or ne"essar$ o he rade usiness or !ro&ession o& hee%!#o$erF or

. )hen he &rine ene&i is &or he "on+enien"e orad+anae o& he e%!#o$er. Se". =28A9 NR: o& 1??7F 1s!ar.Se". 2.== 8A9 Re+. Res. No. =(?

". Grine ene&is ,hi"h are auhoriCed and e-e%!ed

&ro% in"o%e a- under he Ta- :ode or under an$ s!e"ia# #a,Fd. :onriuions o& he e%!#o$er &or he ene&i o& hee%!#o$ee o reire%en insuran"e and hos!ia#iCaion ene&i!#ansF

e. Bene&is i+en o he ran* and &i#e e%!#o$ees,heher raned under a "o##e"i+e arainin aree%en ornoF and

&. "e minimis ene&is as de&ined in he ru#es andreu#aions o e !ro%u#aed $ he Se"rear$ o& Ginan"eu!on re"o%%endaion o& he :o%%issioner o& nerna#Re+enue. 1s!ar. Se". =2 8:9 NR: o& 1??7F Se". 2.== 8:9 Re+.Res. No. =(?

47. e minimis !'!%$( a)! a*%+%$%!( a' #)%%+!/!(8su"h as enerain%en %edi"a# ser+i"es or so("a##ed"oures$ dis"ouns3 on !ur"hases9 &urnished or o&&ered $ ane%!#o$er o his e%!#o$ees. The$ are no "onsidered as"o%!ensaion su/e" o in"o%e a- and "onse4uen#$ o,ihho#din a- i& su"h &a"i#iies are o&&ered or &urnished $ hee%!#o$er %ere#$ as a %eans o& !ro%oin he hea#h ood,i##"onen%en or e&&i"ien"$ o& his e%!#o$ees. Se". 2.71 8A9 8=9Re+. Res. 2(? as a%ended $ Re+. Res. No. (2000

58. T0! &++&%'/ (0a++ ! *&'(%!)! a( de minimis!'!%$( '&$ (-0.00 !er e%!#o$ee !er se%eser or '12>!er %onhF

". Ri"e susid$ o& '1000.00 or one 819 sa"* o& >0(*.ri"e !er %onh a%ounin o no %ore han '1000.00F

d. ;ni&or%s and "#ohin a##o,an"e no e-"eedin

'=000.00 !er annu%F

e. A"ua# $ear#$ %edi"a# ene&is no e-"eedin'10000.00 !er annu%F

&. Laundr$ a##o,an"e no e-"eedin '=00 !er %onhF. E%!#o$ees a"hie+e%en a,ards e.. &or #enh o&

ser+i"e or sa&e$ a"hie+e%en ,hi"h %us e in he &or% o& aani#e !ersona !ro!er$ oher han "ash or i& "eri&i"ae,ih an annua# %onear$ +a#ue no e-"eedin '10000.00

re"ei+ed $ an e%!#o$ee under an esa#ished ,rien !#an,hi"h does no dis"ri%inae in &a+or o& hih#$ !aid e%!#o$eesF

h.


27/95

53. So"* di+idends are unrea#iCed ains and "anno esu/e" o in"o%e a- uni# he ains ha+e een rea#iCed.Be&ore rea#iCaion so"* di+idends are nohin u are!resenaion o& an ineres in he "or!orae !ro!eries. As"a!ia# i is no $e su/e" o in"o%e a-. (Commissioner ofInternal Revenue v. Court of Appeals, et al., G.R. 7o. 9=?;@,2anuar! :=, 9$

54. istinguishexclusions from deductions$S;09 $ears o& ae a i%e o&

reire%enF=9 A+ai#ed o& he ene&i o& e-"#usion on#$ on"e.

Se". =2 8B9 8@9 8a9 NR: o& 1??7 The reirin o&&i"ia# ore%!#o$ee shou#d no ha+e !re+ious#$ a+ai#ed o& he!ri+i#ee under he reire%en !#an o& he sa%e oranoher e%!#o$er. 1s!ar. Se". 2.7 8B9 819 Re+. Res. No.2(?

5. S!#a)a$%&' )!$%)!"!'$ #a, !*+-! )&"

/)&(( %'*&"!: 0!'*! $a!!"#$a. An$ a%oun re"ei+ed $ an o&&i"ia# e%!#o$ee or $

his heirs. Gro% he e%!#o$er

27


28/95

". As a "onse4uen"e o& se!araion o& su"h o&&i"ia# ore%!#o$ee &ro% he ser+i"e o& he e%!#o$er e"ause o&

19 Deah si"*ness or oher !h$si"a# disai#i$F or29 Gor an$ "ause e$ond he "onro# o& said

o&&i"ia# or e%!#o$ee Se". =2 8B9 8@9 89 NR: o& 1??7su"h as reren"h%en redundan"$ and "essaion o&usiness. 1s!ar. Se". 2.7 8B9 819 89 Re+. Res. No. 2(

?

5. 'riCes ha are e-"#uded &ro% ross in"o%ehen"e no a-a#e6

a. 'riCes and a,ards %ade !ri%ari#$ in re"oniion o&re#iious "haria#e s"ieni&i" edu"aiona# arisi" #ierar$ or"i+i" a"hie+e%en u on#$ i&

19 The re"i!ien ,as se#e"ed ,ihou an$a"ion on his !ar o ener he "ones or !ro"eedinFand

29 The re"i!ien is no re4uired o render

susania# &uure ser+i"es as a "ondiion o re"ei+inhe !riCe or a,ard. Se". =2 8B9 Q7 Q" NR: o& 1??7. A## !riCes and a,ards

19


29/95

"onne"ed ,ih !ro&ession rade or usiness no susainede,een re#aed !aries.

Residen "iiCens residen a#ien indi+idua#s andnonresiden a#ien indi+idua#s ,ho are enaed in rade andusiness on heir ross in"o%es oher &ro% "o%!ensaionin"o%e are a##o,ed o dedu" hese e-!enses. Do%esi""or!oraions esaes and russ %a$ a#so dedu" his e-!ense.

Nonresiden "iiCens and &orein "or!oraions on heir rossin"o%es &ro% ,ihin %a$ a#so dedu" his e-!ense.

Nonresiden a#ien indi+idua#s no enaed in rade orusiness in he 'hi#i!!ines are no a##o,ed o dedu" hise-!ense.

&. D!#)!*%a$%&' or a reasona#e a##o,an"e &or hee-hausion ,ear and ear 8in"#udin reasona#e a##o,an"e &oroso#es"en"e9 o& !ro!er$ used in rade or usiness.

Residen "iiCens residen a#ien indi+idua#s andnonresiden a#ien indi+idua#s ,ho are enaed in rade andusiness on heir ross in"o%es oher &ro% "o%!ensaion

in"o%e are a##o,ed o dedu" hese e-!enses. Do%esi""or!oraions esaes and russ %a$ a#so dedu" his e-!ense.Nonresiden "iiCens and &orein "or!oraions on heir rossin"o%es &ro% ,ihin %a$ a#so dedu" his e-!ense.


. D!#+!$%&'or dedu"ion arisin &ro% he e-hausiono& a non(re!#a"ea#e asse usua##$ a naura# resour"e.

Residen "iiCens residen a#ien indi+idua#s andnonresiden a#ien indi+idua#s ,ho are enaed in rade and

usiness on heir ross in"o%es oher &ro% "o%!ensaionin"o%e are a##o,ed o dedu" hese e-!enses. Do%esi""or!oraions esaes and russ %a$ a#so dedu" his e-!ense.Nonresiden "iiCens and &orein "or!oraions on heir rossin"o%es &ro% ,ihin %a$ a#so dedu" his e-!ense.


h. C0a)%$a+! and oher *&'$)%-$%&'(. Residen"iiCens residen a#ien indi+idua#s and nonresiden a#ienindi+idua#s ,ho are enaed in rade and usiness on heirross in"o%es oher &ro% "o%!ensaion in"o%e are a##o,ed o

dedu" hese e-!enses. Do%esi" "or!oraions esaes andruss %a$ a#so dedu" his e-!ense. Nonresiden "iiCens and&orein "or!oraions on heir ross in"o%es &ro% ,ihin %a$a#so dedu" his e-!ense.


i. R!(!a)*0 a' !!+"!'$ e-!endiures reaedas de&erred e-!enses !aid or in"urred $ he a-!a$er in"onne"ion ,ih his rade usiness or !ro&ession no dedu"edas e-!enses and "harea#e o "a!ia# a""oun u no"harea#e o !ro!er$ o& a "hara"er ,hi"h is su/e" ode!re"iaion or de!#eion.

Residen "iiCens residen a#ien indi+idua#s andnonresiden a#ien indi+idua#s ,ho are enaed in rade andusiness on heir ross in"o%es oher &ro% "o%!ensaionin"o%e are a##o,ed o dedu" hese e-!enses. Do%esi""or!oraions esaes and russ %a$ a#so dedu" his e-!ense.

Nonresiden "iiCens and &orein "or!oraions on heir rossin"o%es &ro% ,ihin %a$ a#so dedu" his e-!ense.Nonresiden a#ien indi+idua#s no enaed in rade or

usiness in he 'hi#i!!ines are no a##o,ed o dedu" hise-!ense.

/. C&'$)%-$%&'( $& #!'(%&' $)-($(. Residen "iiCensresiden a#ien indi+idua#s and nonresiden a#ien indi+idua#s ,hoare enaed in rade and usiness on heir ross in"o%esoher &ro% "o%!ensaion in"o%e are a##o,ed o dedu" hesee-!enses. Do%esi" "or!oraions esaes and russ %a$ a#sodedu" his e-!ense. Nonresiden "iiCens and &orein

"or!oraions on heir ross in"o%es &ro% ,ihin %a$ a#sodedu" his e-!ense.Nonresiden a#ien indi+idua#s no enaed in rade or

usiness in he 'hi#i!!ines are no a##o,ed o dedu" hise-!ense.

*. I'(-)a'*! #)!"%-"(&or hea#h and hos!ia#iCaion.Residen "iiCens residen a#ien indi+idua#s and nonresidena#ien indi+idua#s ,ho are enaed in rade and usiness onheir ross in"o%es oher &ro% "o%!ensaion in"o%e area##o,ed o dedu" hese e-!enses. Nonresiden "iiCens andnonresiden a#ien indi+idua# enaed in rade or usiness in he

29


30/95

'hi#i!!ine on heir ross in"o%es &ro% ,ihin %a$ a#so dedu"hese !re%iu%s.

Nonresiden a#ien indi+idua#s no enaed in rade orusiness in he 'hi#i!!ines are no a##o,ed o dedu" hese!re%iu%s.

#. P!)(&'a+ a' a%$%&'a+ !!"#$%&'(. Residen"iiCens and residen a#ien on heir ross in"o%es and &ro%

"o%!ensaion in"o%e are a##o,ed o dedu" hese !re%iu%s.Nonresiden "iiCens on heir ross in"o%es &ro% ,ihin %a$a#so dedu" his e-!ense. Nonresiden a#ien indi+idua#senaed in rade or usiness in he 'hi#i!!ines are a##o,ed odedu" hese e-e%!ions under re"i!ro"i$.


61. E-raordinar$ dedu"ionsa. Those a##o,ed o insuran"e "o%!anies

. Dedu"ions a##o,ed o esaes and russ a+ai#in o&ie%iCed dedu"ions o& in"o%e "urren#$ disriued oene&i"iaries.

". Losses &ro% ,ash sa#es o& so"*s or se"uriies.d. :erain "a!ia# #osses u on#$ &ro% "a!ia# ains.

62. O)%'a), !#!'(!( %($%'/-%(0! )&"*a#%$a+ !#!'%$-)!(. Ordinar$ e-!enses are hose ,hi"h are"o%%on o in"ur in he rade or usiness o& he a-!a$er)HLE "a!ia# e-!endiures are hose in"urred o i%!ro+easses and ene&is &or %ore han one a-a#e $ear. Ordinar$e-!enses are usua##$ in"urred durin a a-a#e $ear andene&is su"h a-a#e $ear. Ne"essar$ e-!enses are hose,hi"h are a!!ro!riae or he#!&u# o he usiness.

63. What are the re.uisites for thedeductibility of business expenses ?

S;


31/95

. R!*&/'%$%&' & %'*&"! a' !#!'(!( -'!) $0!a**)-a+ "!$0& & a**&-'$%'/. A%ouns o& in"o%e a""rue ,herehe rih o re"ei+e he% e"o%es &i-ed ,here here is "reaed anen&or"ea#e #iai#i$. Liai#iies are in"urred ,hen &i-ed anddeer%ina#e in naure ,ihou reard o indeer%ina"$ %ere#$ o& i%e

o& !a$%en.. 8Commissioner of Internal Revenue v, Isa#ela culturalCorporation,


32/95

=9 1.00 !er"en 819 o& ne re+enue 8i.e.ross re+enue #ess dis"ouns9 &or a-!a$ers enaed insa#e o& ser+i"es in"#udin e-er"ise o& !ro&ession anduse or #ease o& !ro!eries. 9 Ho,e+er i& he a-!a$er is deri+inin"o%e &ro% oh sa#e o& oodsP!ro!eries andser+i"es he a##o,a#e enerain%en a%use%en and

re"reaion e-!ense sha## in a## "ases e deer%inedased on an a!!orion%en &or%u#a a*in ino"onsideraion he !er"enae o& he ne sa#esPnere+enue o he oa# ne sa#esPne re+enue u ,hi"h inno "ase sha## e-"eed he %a-i%u% !er"enae "ei#in.8Se". > I#id.9

67. )ho are a##o,ed o dedu" enerain%ena%use%en and re"reaion e-!enses6

a. ndi+idua#s enaed in rade or usiness in"#udina-a#e esaes and russF

. ndi+idua#s enaed in he !ra"i"e o& !ro&essionF ". Do%esi" "or!oraionsF d. Residen &orein "or!oraionsF e.


33/95

$a"h +a"aion ho%e or "ondo%iniu% or ie% o& rea# or!ersona# !ro!er$ %us e o,ned or &or% !ar o& he a-!a$ersrade usiness or !ro&ession or rened $ su"h a-!a$er &or,hi"h he a-!a$er "#ai%s a de!re"iaion or rena# e-!ense. A$a"h sha## e "onsidered an enerain%en &a"i#i$ i& is use isin &a" no resri"ed o s!e"i&ied o&&i"ers or e%!#o$ees or!osiions in su"h a %anner as o %a*e he sa%e a &rine

ene&i &or !ur!oses o& i%!osin he &rine ene&is a-.3 8h!ar. Se". 2 Re+. Res. 10(20029

5.


34/95

2. n addiion o he e-!enses a##o,a#e as dedu"ionsa !ri+ae edu"aiona# insiuion %a$ a is o!ion e#e" eiher6 a. To dedu" e-!endiures oher,ise "onsidered as"a!ia# ou#a$s o& de!re"ia#e asses in"urred durin hea-a#e $ear &or he e-!ansion o& s"hoo# &a"i#iies or . To dedu" a##o,an"e &or de!re"iaion hereo&. Se". =8A9 829 NR: o& 1??7

3. Ginan"ia# sae%ens audied $ in de!endene-erna# audiors "onsiue he nor%a# %ehod o& !roo& o& he!ro&i and #oss !er&or%an"e o& a "o%!an$. A "o%!arai+esae%en o& re+enue and e-!enses &or ,o $ears $ ise#& isno "on"#usi+e !roo& o& serious usiness #osses. (Bogo/edellin 'ugarcane Planters Association, Inc. v. 7RC, et al.,:@ 'CRA 9=?, 9:9$

4. Ba !$( are hose ,hi"h resu# &ro% he,orh#essness or un"o##e"ii#i$ in ,ho#e or in !ar o& a%ounsdue he a-!a$er $ ohers arisin &ro% %one$ #en or &ro%

un"o##e"i#e a%ouns o& in"o%e &ro% oods so#d or ser+i"esrendered. 8Se". 2.a Re+. Res. >(??9

5. T0! &++&%'/ a)! )!+a$! #a)$%!(a. Me%ers o& he sa%e &a%i#$. The &a%i#$ o& an

indi+idua# sha## in"#ude on#$ his rohers and sisers 8,heher$ he ,ho#e or ha#&(#ood9 s!ouse an"esors and #inea#des"endansF

. An indi+idua# and a "or!oraion %ore han &i&$ !er"en8>09 in +a#ue o& he ousandin so"* o& ,hi"h is o,neddire"#$ or indire"#$ $ or &or su"h indi+idua#F

". T,o "or!oraions %ore han &i&$ !er"en 8>09 in+a#ue o& he ousandin so"* o& ,hi"h is o,ned dire"#$ orindire"#$ $ or &or he sa%e indi+idua#F

d. A ranor and a &idu"iar$ o& an$ rusF ore. The &idu"iar$ o& a rus and he &idu"iar$ o& anoher

rus i& he sa%e !erson is a ranor ,ih res!e" o ea"h rusFor

&. A &idu"iar$ o& a rus and a ene&i"iar$ o& su"h. Se".=@ 8B9 NR: o& 1??7

6. R!@-%(%$!( &) a+% !-*$%&' & a !$()&" /)&(( %'*&"!

a. There %us e an e-isin indeedness due o hea-!a$er ,hi"h %us e +a#id and #ea##$ de%anda#eF . The sa%e %us e "onne"ed ,ih he a-!a$ersrade usiness or !ra"i"e o& !ro&essionF ". The sa%e %us no e susained in a ransa"ionenered ino e,een re#aed !ariesF d. The sa%e %us e a"ua##$ "hared o&& he oo*s o&

a""ouns o& he a-!a$er as o& he end o& he a-a#e $earF and e. The de %us e a"ua##$ as"erained o e,orh#ess and un"o##e"i#e durin he a-a#e $earF &. The des are un"o##e"i#e des!ie di#ien e&&ore-ered $ he a-!a$er. Se". = 8E9 819 NR: o& 1??7F Se". =Re+. Res. No. >(?? reieraed in Re+. Res. No. 2>(2002F PhilippineRefining Corporation v. Court of Appeals, et al., :@ 'CRA @@;

. Mus ha+e een re!ored as re"ei+a#es in hein"o%e a- reurn o& he "urren or !rior $ears. 8Se". 10= Re+.Res. No. 296

. Reser+e &or ad des are no dedu"i#e &ro% ross

in"o%e e"ause he des ha+e no $e een as"erained o ead des.

. The +a#ue o& ,orh#ess se"uriies are no a##o,ed oe dedu"i#e &ro% ross in"o%e e"ause he$ are "onsideredas "a!ia# #osses and %a$ e dedu"ed on#$ &ro% "a!ia# ains.

7. The a- ene&i ru#e3 !osis ha he re"o+er$ o& addes !re+ious#$ a##o,ed as dedu"ion in he !re"edin $ear or$ears sha## e in"#uded as !ar o& he a-!a$ers ross in"o%ein he $ear o& su"h re"o+er$ o he e-en o& he in"o%e a-

ene&i o& said dedu"ion.

78. & in he $ear he a-!a$er "#ai%ed dedu"ion o& addes ,rien(o&& he rea#iCed a redu"ion o& he in"o%e a- due&ro% hi% on a""oun o& he said dedu"ion his suse4uenre"o+er$ hereo& &ro% his deor sha## e reaed as a re"ei! o&rea#iCed a-a#e in"o%e. 8Se". Re+. Res. >(??9

71. & he said a-!a$er did no ene&i &ro% hededu"ion o& he said ad de ,rien(o&& e"ause i did noresu# o an$ redu"ion o& his in"o%e a- in he $ear o& su"h

dedu"ion 8i.e. ,here he resu# o& his usiness o!eraion ,as a

34


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36/95

". Residenia# houses and #ands o,ned and used assu"hF d. Auo%oi#es no used in rade and usinessF

e. 'ainins s"u#!ures sa%! "o##e"ions o/e"s o&ars ,hi"h are no used in rade or usinessF

&. nheried #are ra"s o& ari"u#ura# #and ,hi"h ,eresudi+ided !ursuan o he o+ern%en %andae under #and

re&or% hen so#d o enans . (Ro&as v. Court of Ta& Appeals, etc./:=, April :@, 9@?$. Rea# !ro!er$ used $ an e-e%! "or!oraion in is

e-e%! o!eraions su"h as a "or!oraion in"#uded in heenu%eraion o& Se"ion =0 o& he :ode sha## no e"onsidered used &or usiness !ur!oses and here&ore"onsidered as "a!ia# asse.3 8#as senen"e =rd!ar. Se". =.Re+. Res. No. 7(200=9

h. Rea# !ro!er$ ,heher sin#e dea"hedo,nhouse or "ondo%iniu% uni no used in rade or usinessas e+iden"ed $ a "eri&i"aion &ro% he Barana$ :hair%an or&ro% he head o& ad%inisraion in "ase o& "ondo%iniu% unio,nhouse or a!ar%en and as +a#idaed &ro% he e-isina+ai#a#e re"ords o& he Bureau o& nerna# Re+enue o,ned $an indi+idua# enaed in usiness sha## e reaed as "a!ia#asse.3 8#as !ar. Se". =.. Re+. Res. No. 7(200=9

77. O)%'a), a((!$( (0a++ )!!) $& a++ )!a+ #)!)$%!((#!*%%*a++, !*+-! )&" $0! !%'%$%&' & *a#%$a+ a((!$(:na%e#$6

a. So"* in rade o& a a-!a$er or oher rea# !ro!er$ o& a*ind ,hi"h ,ou#d !ro!er#$ e in"#uded in he in+enor$ o& aa-!a$er i& on hand a he "#ose o& he a-a#e $earF or . Rea# !ro!er$ he#d $ he a-!a$er !ri%ari#$ &or sa#eo "uso%ers in he ordinar$ "ourse o& his rade or usinessF or ". Rea# !ro!er$ used in rade or usiness 8i.e. ui#dinsandPor i%!ro+e%ens9 o& a "hara"er ,hi"h is su/e" o hea##o,an"e &or de!re"iaionF or

d. Rea# !ro!er$ used in rade or usiness o& hea-!a$er. 8Se". 2. Re+. Res. No. 7(200=9

188. Rea# !ro!eries a"4uired $ an*s hrouh&ore"#osure sa#es are "onsidered heir ordinar$ asses.Ho,e+er an*s sha## no e "onsidered as haiua##$ enaed

in he rea# esae usiness &or !ur!oses o& deer%inin hea!!#i"a#e rae o& ,ihho#din a-. 8Se". 2. Re+. Res. No. 7(200=9

A !ro!er$ !ur"hased &or &uure use in he usiness e+enhouh his !ur!ose is #aer h,ared $ "ir"u%san"es e$ondhe a-!a$ers "onro# does no #ose is "hara"er as anordinar$ asse. Nor does a %ere dis"oninuan"e o& he a"i+e

use o& he !ro!er$ "hane is "hara"er !re+ious#$ esa#ishedas a usiness !ro!er$.3 8#as senen"e Se". =.a. Re+. Res. No.7(200=9

181. E-a%!#es o& ordinar$ asses hen"e no "a!ia#asses6

a. The %a"hiner$ and e4ui!%en o& a %anu&a"urin"on"ern su/e" o de!re"iaionF . The ra"ors rai#ers and ru"*s o& a hau#in "o%!an$F

". The "ondo%iniu% ui#din o,ned $ a rea#$"o%!an$ he unis o& ,hi"h are &or ren or &or sa#eF

d. The ,ood !ain +arnish nai#s #ue e". ,hi"h are

he ra, %aeria#s o& a &urniure &a"or$Fe. nheried !ar"e#s o& #and o& susania# areas #o"aed

in he hear o& Mero Mani#a ,hi"h ,ere sudi+ided inos%a##er #os hen so#d on insa##%en asis a&er inrodu"in"o%!arai+e#$ +a#ua#e i%!ro+e%ens no &or he !ur!ose o&si%!#$ #i4uidain he esae u o %a*e he% %ore sa#ea#e Fhe e%!#o$%en o& an aorne$(in(&a" &or he !ur!ose o&de+e#o!in %anain ad%iniserin and se##in he #osF sa#es%ade ,ih &re4uen"$ and "oninui$F annua# sa#es in"o%e &ro%he sa#es ,as "onsidera#eF and he heir ,as no a sraner ohe rea# esae usiness. (Tua)on, 2r. v. ingad, ? 'CRA 9;=$

&. nheried ari"u#ura# !ro!er$ i%!ro+ed $inrodu"ion o& ood roads "on"ree uers drainae and#ihin s$se%s "on+ers he !ro!er$ o an ordinar$ asse.The !ro!er$ &or%s !ar o& he so"* in rade o& he o,nerhen"e an ordinar$ asse. This is so as he o,ner is no,enaed in he usiness o& sudi+idin rea# esae. 8Calasan) v.Commissioner of Internal Revenue, 9


37/95

"#assi&i"aion o& su"h !ro!er$ in he hands o& heu$erPrans&eree sha## e deer%ined in a""ordan"e ,ih he&o##o,in ru#es6

a. Rea# !ro!er$ rans&erred hrouh su""ession ordonaion o he heir or donee ,ho is no enaed in he rea#esae usiness ,ih res!e" o he rea# !ro!er$ inheried ordonaed and ,ho does no suse4uen#$ use su"h !ro!er$ in

rade or usiness sha## e "onsidered as a "a!ia# asse in hehands o& he heir or donee.. Rea# !ro!er$ re"ei+ed as di+idend $ so"*ho#ders

,ho are no enaed in he rea# esae usiness and ,ho nosuse4uen#$ use su"h rea# !ro!er$ in rade or usiness sha##e reaed as "a!ia# asses in he hands o& he re"i!ien e+eni& he "or!oraion ,hi"h de"#ared he rea# !ro!er$ di+idend isenaed in rea# esae usiness.

". The rea# !ro!er$ re"ei+ed in an e-"hane sha## ereaed as ordinar$ asse in he hands o& he rans&eree in he"ase o& a a-(&ree e-"hane $ a-!a$er no enaed in rea#

esae usiness o a a-!a$er ,ho is enaed in rea# esaeusiness or o a a-!a$er ,ho e+en i& no enaed in rea#esae usiness ,i## use in usiness he !ro!er$ re"ei+ed inhe e-"hane. 8Se". =.&. Re+. Res. No. 7(200=9

183. Ga"ors "onsidered as he#!&u# uides indeer%inin ,heher asse is ordinar$ or "a!ia#6 a. The !ur!ose &or ,hi"h he !ro!er$ ,as iniia##$a"4uiredF . The !ur!ose &or ,hi"h he !ro!er$ ,as suse4uen#$he#dF ". The e-en o ,hi"h he i%!ro+e%ens i& an$ ,ere%ade $ he a-!a$erF d. The &re4uen"$ nu%er and "oninui$ o& sa#esF e. The e-en and naure o& he ransa"ionsin+o#+edF &. The ordinar$ usiness o& he a-!a$erF . The e-en o& ad+erisin !ro%oion or ohera"i+iies used in so#i"iin u$ers &or he sa#e o& he !ro!er$F h. The #isin o& !ro!er$ ,ih ro*ersF and i. The !ur!ose &or ,hi"h he !ro!er$ ,as he#d a hei%e o& sa#e. 0lum#a, et al. v. The %onora#le Commissioner of

Internal Revenue, CTA Case 7o. 9=>, August 9@, 9@ 1lar3o8s3i,TC 9@/>:?, affirmed >? -. :d (CA/;, 9@;9

/. Rea# !ro!eries a"4uired $ an*s hrouh&ore"#osure sa#es are "onsidered as heir ordinar$ asses.Ho,e+er an*s sha## no e "onsidered as haiua##$ enaedin he rea# esae usiness &or !ur!oses o& deer%inin hea!!#i"aion rae o& ,ihho#din a- i%!osed3 under Re+enueReu#aions. 8#as !ar. Se". 2. Re+. Res. No. 7(200=9

184. Monear$ "onsideraion or he !resen"e orasen"e o& !ro&i in he o!eraion o& he !ro!er$ is nosini&i"an in he "hara"eriCaion o& he !ro!er$. So #on ashe !ro!er$ is or has een used &or usiness !ur!oses,heher &or he ene&i o& he o,ner or na$ o& is %e%ers orso"*ho#ders i sha## e "onsidered as an ordinar$ asse.3 81s

and 2ndsenen"es =rd!ar. Se". =.. Re+. Res. No. 7(200=9

185. Ta-!a$ers enaed in he rea# esae usinesssha## re&er "o##e"i+e#$ o rea# esae dea#ers rea# esae

de+e#o!ers andPor rea# esae #essors. 8Se". 2. Re+. Res. No.7(200=9

186. The er% a-!a$ers no enaed in he rea# esaeusinesssha## re&er o !ersons oher han rea# esae dea#ersrea# esae de+e#o!ers andPor rea# esae #essors. A a-!a$er,hose !ri%ar$ !ur!ose o& enain in usiness or ,hoseAri"#es o& n"or!oraion saes ha is !ri%ar$ !ur!ose is oenae in he rea# esae usiness sha## e dee%ed o eenenaed in he rea# esae usiness. 8Se". 2. Re+. Res. No. 7(200=9

18. The a- is i%!osed u!on "a!ia# ains

!resu%ed o ha+e een rea#iCed &ro% he sa#e e-"hane oroher dis!osiion o& rea# !ro!er$ #o"aed in he 'hi#i!!ines"#assi&ied as "a!ia# asses.3 Se". 2 8D9 819 NR: o& 1??7Re+enue Reu#aions No. 7(200= has de&ined rea# !ro!er$ asha+in he sa%e %eanin ariued o ha er% under Ari"#e1> o& Re!u#i" A" No. =@ oher,ise *no,n as he CivilCode of the Philippines.5 8Se". 2." Re+. Res. No. 7(200=9

37


38/95

18. 'ro!er$ %us e #o"aed in he 'hi#i!!ines &or!ur!oses o& "a!ia# ains a-aion. . Se". 2 8D9 819 NR: o&1??7

187. Ta- rea%en ,here !ro!er$ is no #o"aed in he'hi#i!!ines.


39/95

117. Rea# !ro!eries a"4uired $ an*s hrouh&ore"#osure sa#es are "onsidered as heir ordinar$ asses.Ho,e+er an*s sha## no e "onsidered as haiua##$ enaedin he rea# esae usiness &or !ur!oses o& deer%inin hea!!#i"aion rae o& ,ihho#din a- i%!osed3 under Re+enueReu#aions. 8#as !ar. Se". 2. Re+. Res. No. 7(200=9

128. The asis &or he &ina# !resu%ed "a!ia# ains a-o& si- !er "en 8@9 is ,hi"he+er is he hiher o& he a. ross se##in !ri"e or . he "urren &air %ar*e +a#ue as deer%ined e#o,6

19 he &air %ar*e +a#ue or rea# !ro!eries#o"aed in ea"h Cone or area as deer%ined $ he:o%%issioner o& nerna# Re+enue a&er "onsu#aion,ih "o%!een a!!raisers oh &ro% he !ri+ae and!u#i" se"orsF or

29 he &air %ar*e +a#ue as sho,n in hes"hedu#e o& +a#ues o& he 'ro+in"ia# and :i$ Assessors.

Se". 2 8D9 819 in re#aion o Se". @ 8E9 oh o& he NR: o&1??7

does no %aer ,heher here ,as an a"ua# ain or#oss e"ause he a- is a !resu%ed3 "a!ia# ains a-. is heransa"ion ha is a-ed no he ain.

121. Ho#din !eriod no a!!#ied o he a-aion o& he!resu%ed "a!ia# ains deri+ed &ro% he sa#e o& rea# !ro!er$"onsidered as "a!ia# asses.

122. The a- #iai#i$ o& indi+idua# a-!a$ers 8no"or!orae9 i& an$ on ains &ro% sa#es or oher dis!osiions o&rea# !ro!er$ "#assi&ied as "a!ia# asses o he o+ern%en oran$ o& is !o#ii"a# sudi+isions or aen"ies or o o+ern%eno,ned or "onro##ed "or!oraions sha## e deer%ined a heo!ion o& he a-!a$er $ in"#udin he !ro"eeds as !ar o&ross in"o%e o e su/e"ed o he a##o,a#e dedu"ionsandPor !ersona# and addiiona# e-e%!ions hen o hes"hedu#ar a- Se". 2 8D9 819 in re#aion o Se". 2 8A9 819 oh o&he NR: o& 1??7 or he &ina# !resu%ed "a!ia# ains a- o& si-!er"en 8@9. Se". 2 8D9 819 in re#aion o Se". @ 8E9 oh o& heNR: o& 1??7

123. The ineres a he #ea# rae on he +a#ue o&e-!ro!riaed #and shou#d e a-ed as ordinar$ in"o%e and noas "a!ia# ains. (Gon)ales v. Court of Ta& Appeals, et al., 9:9 Phil.?@9$

124. The se##er o& he rea# !ro!er$ "#assi&ied as a"a!ia# asse !a$s he !resu%ed "a!ia# ains a- ,heher6

a. an indi+idua# Se". 2 8D9 819 NR: o& 1??7F 19 :iiCen ,heher residen or no I#id.F 29 Residen a#ien I#id.F

=9 Nonresiden a#ien enaed in rade or usinessin he 'hi#i!!ines Se". 2> 8A9 8=9 in re#aion o Se". 2 8D9819 oh o& he NR: o& 1??7F

9 Nonresiden a#ien no enaed in rade orusiness in he 'hi#i!!ines Se". 2> 8B9 in re#aion o Se".2 8D9 819 oh o& he NR: o& 1??7F

. an esae or rus 8I#id.9F ". a do%esi" "or!oraion. Se". 27 8D9 8>9 NR: o& 1??7

125. The !ro"eeds o& sa#e o& rea# !ro!er$ "#assi&ied as"a!ia# asses $ &orein "or!oraions sha## e su/e" oordinar$ in"o%e a-aion o& ,hi"he+er is hiher e,een heredu"ed rae o& =2 and he %ini%u% "or!orae in"o%e a-Se". 2 8A9 819 829 in re#aion o Se". 27 8E9 oh o& he NR: o&1??7

126. n he insan"es ,here non(residen a#iens are4ua#i&ied o o,n rea# !ro!er$ in he 'hi#i!!ines 8#i*e"ondo%iniu% unis or ui#dins or oher i%%o+a#es asde&ined under Ar. 1> o& Re!. A" No. =@ he :i+i# :ode o&

he 'hi#i!!ines9 and hese are "onsidered as "a!ia# in"hara"er he$ are o e su/e" o a- in he sa%e %anner as"iiCens and residen a#iens. Se". 2> 8A9 8=9 and Se". 2> 8B9 inre#aion o Se". 2 8D9 a## o& he NR: o& 1??7

12. E*!#$! )&" $0! #a,"!'$ & $0! #)!(-"!

*a#%$a+ /a%'( $a a)! $0&(! #)!(-"! $& 0a! !!' )!a+%=!)&" $0! %(#&(%$%&' , 'a$-)a+ #!)(&'( & $0!%) #)%'*%#a+#+a*! & )!(%!'*!

a. he !ro"eeds o& ,hi"h is &u##$ ui#iCed in a"4uirin or"onsru"in a ne, !rin"i!a# residen"eF

39


40/95

. ,ihin eiheen 819 "a#endar %onhs &ro% he daeo& sa#e or dis!osiion

". he BR :o%%issioner sha## ha+e een du#$noi&ied $ he a-!a$er ,ihin hir$ 8=09 da$s &ro% he dae o&sa#e or dis!osiion hrouh a !res"ried reurn o& his ineniono a+ai# o& he a- e-e%!ionF and

d. he said a- e-e%!ion "an on#$ e a+ai#ed o& on"e

e+er$ en 8109 $ears. Se". 2 8D9 829 NR: o& 1??7

12. N!$ +&(( *a)),&!) "!a'( $0! !-*$%&' )&"'!$ *a#%$a+ /a%'( & a (-**!!%'/ ,!a) $0! '!$ *a#%$a+ +&(((-!)! -)%'/ $0! #)%&) ,!a). Ne o!erain #oss "arr$(o+eris he dedu"ion &ro% ross in"o%e &or he ne- hree 8=9"onse"ui+e a-a#e $ears &o##o,in he $ear o& su"h #oss hee-"ess o& a##o,a#e dedu"ion o+er he ross in"o%e . 8Se". =?D NR: o& 1??79

127. D%($%'*$%&'( !$!!' '!$ +&(( *a)),&!) a' '!$!)a$%'/ +&(( *a)),&!).

a. Sour"e6 The sour"e o& ne #oss "arr$(o+er are"a!ia# #osses on#$ )HLE he sour"e o& ne o!erain #oss"arr$(o+er are &ro% he ordinar$ rade and usiness o& hea-!a$er.

. )ho %a$ en/o$ he "arr$(o+er6 On#$ a-!a$ersoher han "or!oraions %a$ en/o$ ne #oss "arr$(o+er )HLEon#$ "or!oraions %a$ en/o$ he ne o!erain #oss "arr$(o+er.8Se". =? D NR: o& 1??79

138. C&'*!#$ & '!$ +&(( *a)),&!). An$ a-!a$eroher han a "or!oraion 8indi+idua#s in"#udin russ and

esaes9 ,ho susains in an$ a-a#e $ear a ne "a!ia# #oss&ro% "a!ia# ransa"ions in+o#+in "a!ia# asses 8oher hanrea# !ro!er$ or shares o& so"* no #ised or raded in he so"*e-"hane9 is a##o,ed o rea durin he su""eedin $ear su"hne "a!ia# #oss as a #oss &ro% he sa#e or e-"hane o& a "a!ia#asse 8oher han rea# !ro!er$ or shares o& so"* no #ised andraded in he so"* e-"hane9 he#d &or %ore han ,e#+e%onhs. 8Se". =? D NR: o& 1??79

131. T0! !@-%$, %'!($"!'$ , a a' %' a'&$0!)*&)#&)a$%&' %( *a#%$a+ %' *0a)a*$!):he #oss o& ,hi"h "ou#d e

dedu"i#e on#$ &ro% "a!ia# ains and no &ro% an$ oher

in"o%e o& he a-!a$er. (China Ban3ing Corporation v. Court ofAppeals, et al., G.R. 7o. 9:=?, 5u#$ 1? 20009

132. A *a#%$a+ /a%' &) a *a#%$a+ +&(( '&)"a++, )!@-%)!($0! *&'*-))!'*! & $& *&'%$%&'(&or i o resu#6

a. There is a sa#e or e-"haneF and. The hin so#d or e-"haned is a "a!ia# asse.)hen se"uriies e"o%e ,orh#ess here is sri"#$ no

sa#e or e-"hane u he #a, dee%s he #oss an$,a$ o e a#oss &ro% he sa#e or e-"hane o& "a!ia# asses. (China Ban3ingCorporation v. Court of Appeals, et al. 0 5u#$ 1? 20009

133. Se"uriies de&ined &or dedu"ii#i$ o& ad des areshares o& so"* in a "or!oraion and rihs o sus"rie &or or ore"ei+e su"h shares. The er% in"#udes onds deenuresnoes or "eri&i"aes or oher e+iden"e o& indeedness issued$ an$ "or!oraion in"#udin hose issued $ a o+ern%en or!o#ii"a# sudi+ision hereo& ,ih ineres "ou!ons or inreisered &or%. 8Se". 2. Re+. Res. No. >(??9

134.


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42/95

%ani&es#$ &or%s !ar o& he a-!a$ers ross re"ei!s. Be"ause hea%oun ,ihhe#d e#ons o he a-!a$er he "an rans&er iso,nershi! o he o+ern%en in !a$%en o& his a- #iai#i$. Thea%oun ,ihhe#d induia#$ "o%es &ro% he in"o%e o& he a-!a$erand hus &or%s !ar o& his ross in"o%e. 8Commissioner of InternalRevenue v. Cit!trust Investment Phils., Inc., o& he &und ,hi"h ,en o he Board on Ra"esand o he o,ners o& horses and /o"*e$s. The Su!re%e :our ru#esha he ross re"ei!s o& Mani#a 5o"*e$ :#u shou#d no in"#ude he> e"ause a#houh de#i+ered o he :#u su"h %one$ has eenes!e"ia##$ ear%ar*ed $ #a, or reu#aion &or oher !ersons.

Mani#a 5o"*e$ does no a!!#$ e"ause ,ha ha!!ened here,as ear%ar*in and no ,ihho#din. Ear%ar*in is no he sa%e as,ihho#din. A%ouns ear%ar*ed do no &or% !ar o& ross re"ei!se"ause hese are $ #a, or reu#aion reser+ed &or so%e !ersonoher han he a-!a$er a#houh de#i+ered or re"ei+ed. On he"onrar$ a%ouns ,ihhe#d &or% !ar o& ross re"ei!s e"ause hereare in "onsru"i+e !ossession and no su/e" o an$ reser+aion he,ihho#din aen ein %ere#$ a "ondui in he "o##e"ion !ro"ess.8Commissioner of Internal Revenue v. Cit!trust Investment Phils., Inc.,

operations$Should the refund be granted ?S;


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:#ear#$ hen. MB: is eni#ed o he ra"e !eriod o& &our$ears &ro% 5une 2= 1??? ,hen i ,as auhoriCed $ he BS'o o!erae as a hri& an* e&ore he M:T shou#d e a!!#iedo i. 8anila Ban3ing Corporation v. Commissioner of InternalRevenue, CIT a' 0!' (0&-+ ! %"#&(! a' $0!

&-) 4 ,!a) /)a*! #!)%&. A %ini%u% "or!orae in"o%e a- o&,o !er"en 829 o& he ross in"o%e as o& he end o& he a-a#e$ear as de&ined herein is here$ i%!osed on a "or!oraion a-a#eunder his Ti#e einnin on he &ourh a-a#e $ear i%%ediae#$&o##o,in he $ear in ,hi"h su"h "or!oraion "o%%en"ed is usinesso!eraions ,hen he %ini%u% "or!orae in"o%e a- is reaer hanhe a- "o%!ued under Suse"ion 8A9 o& his se"ion &or he a-a#e$ear.3 Se". 27 8E9 819 NR: o& 1??7

. P!)%& 0!' a *&)#&)a$%&' !*&"!( (-CIT. 8>9 S!e"i&i" ru#es &or deer%inin he !eriod ,hen a"or!oraion e"o%es su/e" o he M:T 8%ini%u% "or!oraein"o%e a-9 (

Gor !ur!oses o& he M:T he a-a#e $ear in ,hi"h usinesso!eraions "o%%en"ed sha## e he $ear in ,hi"h he do%esi""or!oraion reisered ,ih he Bureau o& nerna# Re+enue 8BR9.

Gir%s ,hi"h ,ere reisered ,ih BR in 1?? and ear#ier $earssha## e "o+ered $ he M:T einnin 5anuar$ 1 1??. - - -3 8Re+.Res. No. ?(?9

anila Ban3ing Corporation v. Commissioner of InternalRevenue, 00000.00F

. A%oun o& e-e%! reire%en re"ei+ed $ he heirsunder Re!. A" Mo. ?17F

h. Ne share o& he sur+i+in s!ouse in he "on/ua#!arnershi!.4. The noaria# &ee !aid &or he e-ra/udi"ia# se#e%en

is "#ear#$ a dedu"i#e e-!ense sin"e su"h se#e%en e&&e"eda disriuion o& he esae o his #a,&u# heirs Si%i#ar#$ heaorne$s &ees &or a uardian o& he !ro!er$ durin hede"edens #i&ei%e shou#d a#so e "onsidered as a dedu"i#ead%inisraion e-!ense. The uardian i+es a deai#eda""ounin o& de"edens !ro!er$ and i+es ad+i"e as o he!ro!er se#e%en o& he esae a"s ,hi"h "onriued o,ardshe "o##e"ion o& de"edens asses and he suse4uen

43


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se#e%en o& he "ase. (Commissioner of Internal Revenue v.Court of Appeals, et al., G.R. 7o. 9:>:=@, arch ::, :===$

5. 5udi"ia# e-!enses are e-!enses o& ad%inisraion.Ad%inisraion e-!enses as an a##o,a#e dedu"ion &ro% rossesae o& he de"eden &or !ur!oses o& arri+in a he +a#ue o&he ne esae ha+e een "onsrued o in"#ude a## e-!ensesessenia# o he "o##e"ion o& he asses !a$%en o& des orhe disriuion o& he !ro!er$ o he !ersons eni#ed o i.3 noher ,ords he e-!enses %us e essenia# o he !ro!erse#e%en o& he esae.

6. No dedu"i#e are e-!endiures in"urred &or heindi+idua# ene&i o& he heirs de+isees or #eaees. Thus inLorenCo +. 'osadas he :our "onsrued he !hrase /udi"ia#e-!enses o& he esa%enar$ or inesae !ro"eedins3 as noin"#udin he "o%!ensaion !aid o a rusee o& he de"edensesae ,hen i a!!eared ha su"h rusee ,as a!!oined &orhe !ur!ose o& %anain he de"edens rea# !ro!er$ &or he

ene&i o& he esa%enar$ heir. n anoher "ase he :ourdisa##o,ed he !re%iu%s !aid on he ond &i#ed $ head%inisraor as an e-!ense o& ad%inisraion sin"e he i+ino& a ond is in he naure o& a 4ua#i&i"aion &or he o&&i"e andno ne"essar$ in he se#e%en o& he esae. Neiher %a$aorne$s &ees in"iden o #iiaion in"urred $ he heirs inasserin heir res!e"i+e rihs e "#ai%ed as a dedu"ion &ro%he ross esae. (Commissioner of Internal Revenue v. Court of

Appeals, et al., G.R. 7o. 9:>:=@, arch ::, :===$

. No e+er$ iner(+i+os rans&er in ani"i!aion o&deah is "onsidered rans&er in "one%!#aion o& deah3 &or!ur!oses o& deer%inin he !ro!er$ o e in"#uded in heross esae o& a de"eden.

. To e "onsidered a rans&er in "one%!#aion o&deah3 he de"eden has a an$ i%e %ade a rans&er $ rusor oher,ise in "one%!#aion o& or inended o a*e e&&e" in!ossession or en/o$%en a or a&er deah3 Se". > 8B9 NR: o&1??7. is "#ear ha he !ro!eries are no rans&erred in"one%!#aion o& or inended o a*e e&&e" in !ossession oren/o$%en a or a&er deah.

7. There is no rans&er in "one%!#aion o& deah i&here is no sho,in he rans&eror reained &or his #i&e or &oran$ !eriod ,hi"h does no in &a" end e&ore his deah6 819he !ossession or en/o$%en o& or he rih o he in"o%e &ro%he !ro!er$ or 829 he rih eiher a#one or in "on/un"ion ,ihan$ !erson o desinae he !erson ,ho sha## !ossess oren/o$ he !ro!er$ or he in"o%e here&ro%.3 Se". > 8B9 NR:o& 1??7

18. The a!!ro+a# o& he "our siin in !roae or asa se#e%en riuna# o+er he esae o& he de"eased is no a%andaor$ re4uire%en &or he "o##e"ion o& he esae. The!roae "our is deer%inin issues ,hi"h are no aains he!ro!er$ o& he de"eden or a "#ai% aains he esae as su"hu is aains he ineres or !ro!er$ rih ,hi"h he heir#eaee de+isee e". has in he !ro!er$ &or%er#$ he#d $ hede"eden.

The noi"es o& #e+$ ,ere reu#ar#$ issued ,ihin he

!res"ri!i+e !eriod.The a- assess%en ha+in e"o%e &ina# e-e"uor$ and

en&or"ea#e he sa%e "an no #oner e "onesed $ %eanso& a disuised !roes. (arcos, II v. Court of Appeals, et al., :;>'CRA


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he naiona# s!ors asso"iaion is e-e%! &ro% donors a-.8Se". 1 Re!. A" No. 7>?9

15. A non(residen "iiCen or a#ien is e-e%! on#$ &ro%he !a$%en o& donors a-es i& his i&s are %ade o or &or heuse o& he Naiona# a))%! %'%%-a+(: 0!$0!) *%$%=!'(:)!(%!'$ &) '&')!(%!'$ a+%!'(: 0& & '&$ !)%! %'*&"!#-)!+, )&" *&"#!'(a$%&' (0a++ %+! a )!$-)' &) $0! $aa+!,!a) $& %'*+-! $0! %'*&"! & &$0 (#&-(!(: u ,here i isi%!ra"i"a#e &or he s!ouses o &i#e one reurn ea"h s!ouse%a$ &i#e a se!arae reurn o& in"o%e u he reurns so &i#edsha## e "onso#idaed $ he Bureau &or !ur!oses o&

+eri&i"aion.3 Se"ion >1 8D9 o& he NR: o& 1??7

3. ndi+idua#s re4uired o &i#e an in"o%e a- reurn.

a. E+er$ Gi#i!ino "iiCen residin in he 'hi#i!!inesF. E+er$ Gi#i!ino "iiCen residin ouside he

'hi#i!!ines on his in"o%e &ro% sour"es ,ihin he 'hi#i!!inesF". E+er$ a#ien residin in he 'hi#i!!ines on in"o%e

deri+ed &ro% sour"es ,ihin he 'hi#i!!inesF andd. E+er$ nonresiden a#ien enaed in rade or

usiness or in he e-er"ise o& !ro&ession in he 'hi#i!!ines.Se". >1 8A9 819 NR: o& 1??7

4. I'%%-a+( 0& a)! '&$ )!@-%)! $& %+! a'

%'*&"! $a )!$-)'.a. An indi+idua# ,hose ross in"o%e does no e-"eed

his oa# !ersona# and addiiona# e-e%!ions &or de!endensProvided, Tha a "iiCen o& he 'hi#i!!ines and an$ a#ienindi+idua# enaed in usiness or !ra"i"e o& !ro&ession ,ihinhe 'hi#i!!ines sha## &i#e an in"o%e a- reurn reard#ess o& he

a%oun o& ross in"o%eF. An indi+idua# ,ih res!e" o !ure "o%!ensaionin"o%e &or ser+i"es in ,hae+er &or% !aid in"#udin u no#i%ied o &ees sa#aries ,aes "o%%issions and si%i#arie%s deri+ed &ro% sour"es ,ihin he 'hi#i!!ines he in"o%ea- on ,hi"h has een "orre"#$ ,ihhe#d Provided, Tha anindi+idua# deri+in "o%!ensaion "on"urren#$ &ro% ,o or %oree%!#o$ers a an$ i%e durin he a-a#e $ear sha## &i#e anin"o%e a- reurn6 Provided, further, Tha an indi+idua# ,hose!ure "o%!ensaion in"o%e deri+ed &ro% sour"es ,ihin he'hi#i!!ines e-"eeds Si-$ housand !esos 8'@0000.009 sha##

a#so &i#e an in"o%e a- reurnF". An indi+idua# ,hose so#e in"o%e has een su/e"o &ina# ,ihho#din a-F

d. An indi+idua# ,ho is e-e%! &ro% in"o%e a-!ursuan o he !ro+isions o& he NR: o& 1??7 and oher #a,senera# or s!e"ia#. Se". >1 8A9 829 NR: o& 1??7

5. A' %'%%-a+ 0& %( '&$ )!@-%)! $& %+! a'%'*&"! $a )!$-)' "a, '!!)$0!+!(( ! )!@-%)! $& %+! a'%'&)"a$%&' )!$-)'. Se". >1 8A9 8=9 NR: o& 1??7

6. A *&)#&)a$%&' %+!( %$( %'*&"! $a )!$-)' a'

#a,( %$( %'*&"! $a &-) 4 $%"!( -)%'/ a (%'/+! $aa+!,!a). Uuarer#$ reurns are re4uired o e &i#ed &or he &irshree 4uarers hen a &ina# ad/us%en reurn is &i#ed "o+erinhe oa# a-a#e in"o%e &or he ,ho#e a-a#e $ear e i"a#endar or &is"a#.

. A' %'%%-a+ !a)'%'/ )&" $0! #)a*$%*! & 0%(#)&!((%&' &) 0& !'/a/!( %' $)a! &) -(%'!(( %+!( 0%(%'*&"! $a )!$-)' a' #a,( 0%( %'*&"! $a &-) 4 $%"!(-)%'/ a (%'/+! $aa+! ,!a). Uuarer#$ reurns are re4uiredo e &i#ed &or he &irs hree 4uarers hen an annua# in"o%e

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a- reurn is &i#ed "o+erin he oa# a-a#e in"o%e &or he,ho#e o& he !re+ious "a#endar $ear.

. T0! #-)#&(! & $0! a&! &-) 4 $%"!( a,!a) )!@-%)!"!'$ %( $& "a! aa%+a+! (-%*%!'$ -'( $&"!!$ $0! -/!$a), )!@-%)!"!'$(: on a 4uarer#$ asishere$ in"reasin o+ern%en #i4uidi$. a#so eases

hardshi!s on he !ar o& indi+idua#s ,ho are re4uired o %a*ehis &our i%e reurn. Thus he a-!a$er does no ha+e o raise#are su%s o& %one$ in order o !a$ he a-.

7. A' %'%%-a+ !a)'%'/ #-)!+, *&"#!'(a$%&'%'*&"! %+!( &'+, &'! a''-a+ %'*&"! $a )!$-)' "o+erinhe oa# a-a#e "o%!ensaion in"o%e &or he ,ho#e o& he!re+ious "a#endar $ear.

18. U'!) $0! %$00&+%'/ $a (,($!": $a!(%"#&(! &) #)!(*)%! , $0! NIRC & 177 a)! $& !!-*$! a' %$00!+ , $0! #a,&)( )&" #a,"!'$( "a!$& #a,!!( &) $0! &)"!) $& #a, %)!*$+, $& $0! B-)!a- &I'$!)'a+ R!!'-!. is a#so *no,n as "o##e"ion o& he a- asour"e.

11. A %$00&+%'/ a/!'$ %( !#+%*%$+, "a!#!)(&'a++, +%a+! -'!) $0! Ta C&! &) $0! #a,"!'$ & $0!$a )!@-%)! $& ! %$00!+: in order o "o%!e# he,ihho#din aen o ,ihho#d he a- under an$ and a##"ir"u%san"es. n e&&e" he res!onsii#i$ &or he "o##e"ion o&he a- as ,e## as he !a$%en hereo& is "on"enraed u!onhe !erson o+er ,ho% he 78B9 Re+. Res. No. 2(?

15. T0! $& %'( & *)!%$a+! %$00&+%'/ $a!(are 8a9 a-es ,ihhe#d on in"o%e !a$%ens "o+ered $ hee-!anded ,ihho#din a-F and 89 a-es ,ihhe#d on"o%!ensaion in"o%e.

NOTES AND :OMMENTS616. Pa,"!'$( $& $0! &++&%'/ a)! !!"#$ )&" $0!

)!@-%)!"!'$ & %$00&+%'/ &) 0!' '& %$00&+%'/ $a!()!@-%)!

a. Naiona#


47/95

e". Ho,e+er in"o%e !a$%ens arisin &ro% an$ a"i+i$,hi"h is "ondu"ed &or !ro&i or in"o%e deri+ed &ro% rea#or !ersona# !ro!er$ sha## e su/e" o a ,ihho#din a-.8Se". >7.> Re+. Res. No. 2(?9

1. 7: erroneously withheld the amount of 1B>from the selling price of boo)s authored by 7W8 when thecorrect rate should have been 1=> only$ Since 7W8 is outof the country! 7:8 applied for a refund of the excesswithholding of B>$ -ay 7:8 properly apply for therefund ? 3xplain$

S;


48/95

countering by saying that good faith is not a valid defensefor violation of a special law$ ;urthermore! the DI furtherraises the defense that the government is not bound by theerrors of its agents$ Who is correct ?

ANS)ER6 The a-!a$er is "orre". The se#ed ru#e isha ood &aih and hones e#ie& ha one is no su/e" o a-on he asis o& !re+ious iner!reaion o& o+ern%en aen"iesas*ed o i%!#e%en he a- are su&&i"ien /usi&i"aion o de#eehe i%!osiion o& sur"hares. 8ichel 2. huillier Pa8nshop, Inc. v.Commissioner of Internal Revenue, S CODE

1. When does importation begin! and why is itimportant to )now whether importation has already begunor not ?

S;2 Ani(

Du%!in A" o& 1???.39i%!osed on he i%!oraion o& a !rodu""o%%odi$ or ari"#e o& "o%%er"e ino he 'hi#i!!ines a #esshan is nor%a# +a#ue ,hen desined &or do%esi" "onsu%!ionin he e-!orin "ounr$ ,hi"h is "ausin or is hreaenin o"ause %aeria# in/ur$ o a do%esi" indusr$ or %aeria##$reardin he esa#ish%en o& a do%esi" indusr$ !rodu"inhe #i*e !rodu". Se". =01 8s9 8>9 T:: as a%ended $ Re!. A"No. 7>2 Ani(Du%!in A" o& 1???3

48


49/95

. T0! a'$%-"#%'/ -$, %( %"#&(!

a. )here a !rodu" "o%%odi$ or ari"#e o& "o%%er"e ise-!ored ino he 'hi#i!!ines a a !ri"e #ess han is nor%a#+a#ue ,hen desined &or do%esi" "onsu%!ion in he e-!orin"ounr$

. and su"h e-!oraion is "ausin or is hreaenin o"ause %aeria# in/ur$ o a do%esi" indusr$ or %aeria##$

reards he esa#ish%en o& a do%esi" indusr$ !rodu"in he#i*e !rodu". Se". =01 8a9 T:: as a%ended $ Re!. A" No.7>2 Ani(Du%!in A" o& 1???3

7. N&)"a+ a+-! &) #-)#&(!( & %"#&(%'/ $0! a'$%

-"#%'/ -$,is he "o%!ara#e !ri"e a he dae o& sa#e oi*e !rodu" "o%%odi$ or ari"#e in he ordinar$ "ourse o&rade ,hen desined &or "onsu%!ion in he "ounr$ o& e-!or.Se". =01 8s9 8= 9 T:: as a%ended $ Re!. A" No. 7>2 Ani(Du%!in A" o& 1???3

18. A -"#! %"#&)$! #)&-*$ %( a', #)&-*$:

*&""&%$, &) a)$%*+! & *&""!)*! %'$)&-*! %'$& $0!P0%+%##%'!( a$ a' !#&)$ #)%*! +!(( $0a' %$( '&)"a+ a+-! %'$0! &)%'a), *&-)(! & $)a!: &) $0! +%! #)&-*$:*&""&%$, &) a)$%*+! !($%'! &) *&'(-"#$%&' %' $0!!#&)$%'/ *&-'$),: 0%*0 %( *a-(%'/ &) %( $0)!a$!'%'/ $&*a-(! "a$!)%a+ %'9 T:: as a%ended$ Re!. A" No. 7>2 Ani(Du%!in A" o& 1???3

11. T0! %"#&(%'/ a-$0&)%$, &) $0! a'$%-"#%'/-$, %( $0! S!*)!$a), & T)a! a' I'-($), %' $0! *a(! &'&'a/)%*-+$-)a+ #)&-*$: *&""&%$,: &) a)$%*+! &) $0!S!*)!$a), & A/)%*-+$-)!: %' $0! *a(! & a/)%*-+$-)a+ #)&-*$:*&""&%$, &) a)$%*+!:a&er &or%a# in+esiaion and a&&ir%ai+e&indin o& he Tari&& :o%%ission. Se". =01 8a9 T:: as a%ended$ Re!. A" No. 7>2 Ani(Du%

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2007 Late Breakers Taxation

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