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TAX REMEDIES
========================================================================================
A.
Two
Aspects
of
Tax
Administration
*
There
are
8
rules
on
these
based
on
decided
cases
and
Tax
Laws
-
4
on
assessment
and
4
on
collection
A.1.
ASSESSMENT
NIRC
Local
Government
Real
Property
Taxation
Taxation
Definition
of
Assessment
Basis
of
Definition:
Sec
228
of
NIRC
Basis
of
Definition:
Sec
195
Requirements:
Requirements:
Basis
of
Definition:
Sec
199(F)
of
RA
7160
It
is
an
act
or
process
of
determining
the
value
of
real
property
including
discovery,
classification
or
appraisal
thereof.
Basis
of
Definition:
SC:
Assessment
under
TCC
is
termed
as
liquidation
which
means:
Requirements:
Meralco
vs.
Barles:
To
be
considered
as
valid
assessment
for
purposes
of
real
property
taxation,
remember
KAMLA:
(1)
it
must
indicate
the
Kind
of
property;
(2)
the
Assessed
value
of
such
property;
(3)
Market
value
of
such
real
property;
(4)
Level
of
assessment;
(5)
Actual
use;
(Keyword:
FOR)
Basis:
Section
194:
5-year
prescriptive
period:
if
no
fraud
is
employed;
10-year
prescriptive
period:
if
there
was
fraud
employed;
Basis:
Section
219
&
220:
3-year
general
assessment:
every
3
years,
there
is
a
general
assessment
on
real
properties
10-year
imprescriptibility:
Old
rule
but
carried
over
in
Section
222
of
RA
7160:
Basis:
Section
1602
has
been
amended
by
RA
9135,
Section
4:
Its
no
longer
1
year
but
3-years
from
the
final
payment
of
customs
duties.
As
to
the
10-year
period,
if
a
property
has
already
been
declared,
it
can
still
be
assessed
10
years
prior
to
the
declaration
but
beyond
this,
the
real
property
taxes
are
imprescriptible.
Prescriptive
period
is
suspended
if:
(1)
BIR
is
prohibited
from
making
an
assessment;
(2)
when
a
request
for
reinvestigation
is
granted;
Keyword:
PRO
(Section
194)
(3-year
period
for
general
assessment
under
Sec
219
provides
no
ground
for
suspension.)
is
Prescriptive
period
suspended
if:
(1)
the
local
treasurer
is
legally
prevented
from
making
an
assessment;
(2)
when
a
request
for
reinvestigation
is
granted;
(R.A.
9135,
Section
4
provides
no
ground
for
suspension.)
*
R.R.
18-2013
defines
request
for
reinvestigation
is
a
remedy
properly
filed
if
there
is
a
newly
discovered
evidence.
(3)
Fernandez
Hermanos
vs.
Commissioner:
an
answer
to
a
petition
for
review
filed
by
the
taxpayer
before
the
CTA;
(4)
Waiver
of
statute
of
limitations;
it
must
be
in
writing,
signed
by
the
taxpayer,
accepted
by
the
BIR
in
writing,
and
must
be
executed
before
the
expiration
of
the
prescriptive
period;
(5)
No
property
can
be
the
subject
of
distraint
or
levy;
Methods
in
Making
an
Assessment
Basis
/
Keyword:
Sec
06(B)
+
NPC
====================
Net
Worth
Investigation
Method:
Formula:
There
is
really
no
specific
method
recognized
when
it
comes
to
assessment
of
local
tax
BUT
based
on
Assessment
Revenue
Regulations
3-75,
there
are
3
methods
(2
of
which
are
recognized
in
a
decided
case)
that
may
be
used
by
the
local
government
in
making
an
assessment
of
real
property
tax:
CIR
Net
worth,
end
Less:
Net
worth,
beginning
Reyes
vs.
Almanzor:
(answer)
(1)
Comparable
Sales
Approach
Method:
Add:
items
which
have
understated
the
income/
(2)
Income
Approach
Method
(income
of
the
property)
over-expenses
that
are
non- (3)
Replacement
or
Reproduction
Cost
Method
deductible
Less:
Exclusions
that
have
overstated
the
income
Final
Amount
x
(this
will
be
compared
by
the
BIR
with
the
income
you
have
reported,
if
there
is
a
difference
that
is
the
subject
of
the
deficiency
tax)
Old
Method:
Ad
Valorem
System
New
Method:
Transaction
Valuation
System
Transaction
Value
is
the
price
actually
paid
or
payable
for
goods
when
sold
for
export
to
the
Philippines.
*RA
8181
amended
Sec201
of
the
TCC.
This
amendment
in
effect
recognizes
this
new
system.
====================
Section
06(C)
of
NIRC:
====================
Cash
Expenditure
Method
Example:
Best
Evidence
Obtainable
Rule
(BEO)
Section
06(B)
This
may
be
resorted
to
by
the
BIR
in
4
instances
when:
FINE
(1)
the
taxpayer
filed
a
false
report;
(2)
an
incomplete
report
is
filed;
(3)
no
report
at
all
is
filed;
(4)
an
erroneous
report
is
filed;
A.2.
COLLECTION
NIRC
Local
Government
Real
Property
Taxation
Tariff
&
Customs
Code
Taxation
Rules
on
Prescriptive
Period
to
collect
IR/Local/Real
Property/Tariff
Taxes
Basis:
Section
203,
222
Basis:
Section
194
1.
Section
203
5-year
period
to
collect;
*This
is
subject
to
conflicting
views.
10-year
period
to
collect
BIRs
view:
5
years
-
applies
if
there
was
Tax
Authors:
3
years
fraud
employed
Justice
D:
What
is
clear
is
in
Section
222
you
will
find
the
5-year
period.
>
Sec.
222(a)
its
clear
that
it
is
5
years
if
there
is
a
prior
assessment;
if
there
is
none
apply
the
10
year
period;
In
these
2
provisions,
in
203
(return
is
neither
false
nor
fraudulent)
and
222
(return
if
FFF),
the
BIR
has
2
options:
OPTION
01:
to
conduct
a
prior
assessment
before
collection
Basis:
Section
270
5-year
period
to
collect;
10-year
period
to
collect
-
applies
if
there
was
fraud
employed
Basis:
Section
270
3-year
period
to
collect;
(before
it
is
1
year)
OPTION
02:
BIR
may
immediately
resort
to
collection
without
prior
assessment;
Justice
D:
So
how
do
we
apply
the
rules
on
prescriptive
periods
on
these
two
options?
Under
OPTION
01:
Assessment
must
be
made
within
3
years
from
the
filing
of
the
return
if
filed
before
the
deadline,
and
if
on
the
deadline
take
note
of
the
PHOENIX
Doctrine.
Under
OPTION
02:
NOTE:
Prior
assessment
is
not
a
condition
sine
qua
non
before
the
BIR
can
resort
to
collection.
Under
these
two
options
is
where
the
conflicting
views
mentioned
above
arise
(5
or
3
yeas
period
to
collect).
2.
Section
222
Prescriptive
period
is
suspended
if:
(no
clear
provision)
Pacquiaos
Case:
2
grounds
when
the
CTA
may
enjoin
the
collection
of
IR
Taxes:
when
a.
To
the
opinion
of
the
CTA
the
collection
of
these
taxes
will
jeopardize
the
interest
of
the
taxpayer
or
the
government;
b.
The
taxpayer
(Pacquiao)
must
post
a
surety
bond
not
more
than
double
the
amount
of
that
unpaid
taxes,
interests
and
surcharges;
(2)
when
a
request
for
reinvestigation
is
granted;
(3)
an
answer
to
a
petition
for
review
filed
by
the
taxpayer
before
the
CTA;
(4)
Waiver
of
statute
of
limitations;
(5)
No
property
can
be
the
subject
of
distraint
or
levy;
Q:
Pending
Protest:
May
the
BIR
resort
to
collection
without
resolving
such
protest?
A:
YES.
Republic
vs.
Lim
16
SCRA
584:
Remedies
available
to
the
Taxpayer
(Jurisprudence):
1.
An
implied
denial
is
considered
as
a
decision
by
the
BIR
appealable
to
the
CTA.
2.
File
a
motion
to
dismiss
the
collection
case
on
the
ground
that
the
action
is
premature
(as
you
have
already
appealed
decision
of
the
BIR).
the
Jurisprudence:
SC:
B.
Administrative
Remedies
available
to
the
Government:
Administrative
Remedies
that
may
be
availed
of
by
the
Government
NIRC
Local
Government
Taxation
Real
Property
Taxation
Tariff
&
Customs
Code
Enforcement
of
Tax
Lien
*
Basis:
Section
219
*
Basis:
Section
219
*
Basis:
Section
256
*
Basis:
Section
256
*
Slight
difference
with
NIRCs
provision:
a.
Under
Section
1204:
The
goods
must
be
in
the
custody
of
the
BOC
b.
the
importation
is
neither
prohibited
neither
irregular;
*
If
the
importation
is
irregular
or
prohibited
the
remedy
is
seizure.
*
Civil
Law
on
Preference
&
Concurrence
of
Credits:
#1
on
the
list
is
Taxes
except
when
the
property
is
not
specific.
Distraint
of
Personal
Property
*
Basis:
Section
207A
*
Basis:
Section
175
(Because
the
subject
here
is
real
property
*
Basis:
Section
2301
and
distraint
pertains
to
personal
property.)
*
Forfeiture
is
the
penalty,
seizure
is
the
remedy;
*
Nature
of
forfeiture
proceedings:
in
rem
but
they
are
not
criminal
in
nature
(Section
24B
is
an
erroneous
provision).
Levy
on
Real
Property
*
Basis:
Section
207B
*
Basis:
Section
176
*
Basis:
Section
257
* Section 178:
*Section 213:
* Section 260
(Because
the
subject
here
are
goods,
articles
and
merchandise
and
the
remedy
of
levy
pertains
to
real
property.)
C.
Judicial
Remedies
*
This
may
partake
the
nature
of
filing
a,
institution
of,
and
later
on
prescriptive
Judicial
Remedies
Civil
Action
NIRC
*
Basis:
Section
205
(BIR
can
file
a
civil
case
in
court)
Real
Property
Taxation
Criminal Action
Section
281:
5-year
prescriptive
period.
Q:
Sections
194
and
270
mentioned
fraud,
with
that
word,
does
that
imply
that
LGUs
can
institute
criminal
proceedings
in
court?
A:
NO;
there
is
really
no
authority/provision
granting
the
LGUs
to
institute
criminal
proceedings
in
courts
even
if
there
was
fraud
employed.
Prescriptive
Periods
Tariff
&
Customs
Code
Criminal
Action
Local
Government
Taxation
*
Basis:
Section
3601
The
application
of
the
5-year
period
depends
upon
the
nature
of
the
criminal
violation:
(Lim
Sr.
vs.
CA)
1.
Failure
to
file
a
return:
2.
Filing
of
a
false
or
fraudulent
return:
*
Section
281:
Count
the
5
year
period
from
the
commission
of
such
violation;
if
such
commission
is
unknown,
from
the
discovery.
NOTE:
From
the
discovery
of
such
violation
and
institution
of
criminal
proceedings.
-
dont
forget
the
and
-
this
means
that
the
institution
of
criminal
proceedings
will
only
commence
to
run
if
there
is
such
judicial
proceedings
for
its
punishment
or
investigation
SC:
practically,
the
period
is
imprescriptible
because
the
filing
Administrative
Remedies
NIRC
Local
Government
Taxation
Real
Property
Taxation
Protest
Section 228
Section 195
Section
252:
Payment
under
protest
Section
2308
*
protest
may
be
filed
before
the
collector
of
customs;
Prescriptive
Period:
15
days
from
the
date
of
payment;
Prescriptive
Period:
Prescriptive
Period:
*
filed
before
the
local
treasurer
*
implies
that
payment
must
first
be
made
before
you
protest
the
same;
*
this
requirement
only
applies
to
real
property
tax;
SC:
payment
is
mandatory
otherwise
the
local
treasurer
may
not
take
cognizance
of
that
protest/
it
can
outrightly
ignore
the
same.
Prescriptive
Period:
30
days
from
the
date
of
payment.
Tax
Refund
Compromise
Of
Tax
Liabilities
Section
229
Prescriptive
Period:
2
years
Prescriptive
Period:
2
years
Section
253
Prescriptive
Period:
2
years
*Doctrine
of
supervening
cause
applicable
(claim
of
refund
may
be
suspended
by
this)
Section 204
(You
will
never
find
a
provision
on
compromise;
LGUs
do
not
have
the
power
to
compromise
tax
liabilites)
(No
provision
on
compromise)
Section
1701-1708
*
there
is
really
no
prescriptive
period
here
under
the
TCC;
*
Sec
1707
provides
for
a
1-year
period
but
this
applies
only
to
manifest
error;
for
erroneous
payment
or
undue
payment
=
there
is
really
no
provision;
Jurisprudence:
Philippine
______
Fertilizer
vs.
Customs
Commissioner
SC:
apply
the
6-year
period
for
quasi-
contracts
(because
we
are
talking
here
of
erroneous
payment
and
undue
payment)
under
article
1145.
*follow
the
prescriptive
periods
under
the
civil
code;
Art
1144-47
&
1149.
Periods:
10-6-4-1-5
Justice
Vitug:
Section
2316
Fines,
penalties
and
forfeiture
upon
approval
of
the
Secretary
of
Finance.
10
Discussion:
*BQ:
Procedure
of
the
review
of
the
decision
BIR
on
disputed
assessment
adverse
to
the
taxpayer
up
to
the
Supreme
Court.
A:
Start
with
what
must
be
disputed?
>
final
notice
of
assessment;
this
must
be
questioned
before
the
BIR
then
raffled
off
to
CTA
division
within
then
CTA
en
banc
then
SC.
*RR
18-2013:
formal
letter
of
demand
with
assessment
notice
>
this
is
equivalent
to
final
notice
of
assessment.
3-Notice
Rule:
*Keyword:
MACEN
will
help
you
remember
when
PAN
may
be
dispensed
with
(section
228):
1.
Mathematical
error
-
you
can
easily
determine
the
tax
liability
here
that
is
why
PAN
is
dispensed
with
*
Recall:
BIR
has
180
days
to
resolve
the
request.
If
the
decision
was
made
within
this
period,
such
denial
of
written
claim
for
refund/MR/Reinves
may
be
elevated
to
the
CTA
division
within
30
days
from
receipt
thereof.
11
a.
Taxpayer
may
appeal
the
inaction
within
30d
from
the
lapse
of
the
180d;
or
b.
He
may
await
such
decision
of
the
BIR
and
when
he
receives
such,
he
may
appeal
the
same
within
30d
from
the
receipt
thereof.
BRIEF
PROCEDURE
OF
PROTEST:
1.
Taxpayer
to
BIR
Q:
Is
a
motion
for
reconsideration
against
the
decision
denying
your
MR/Rein
of
the
BIR
allowed?
A:
SC
ruled
MR
is
not
allowed.
It
will
never
toll
the
30day
period
within
which
to
appeal
with
the
CTA.
Q:
How
about
motion
for
extension
of
time
to
file
a
petition
for
review
under
Rule
43,
is
this
allowed?
A:
In
Metroshopping
Corporation
vs.
Toledo,
SC
held
that
that
is
allowed.
Rule
07
of
the
Rules
of
the
CTA
allow
the
same
applying
in
suppletory
character
the
provisions
of
Rules
43,
44
which
allow
extension
of
time.
*
File
a
petition
for
review
under
Rule
42
raising
questions
of
facts
or
law
or
both.
This
case
will
first
be
raffled
off
to
CTA
division
whose
decision
is
appealable
to
CTA
en
banc.
Q:
What
is
the
applicable
prescriptive
period?
A:
Rule
08,
section
3(b)
of
the
Rules
of
the
CTA
provides
for
15-day
period.
When
you
appeal
a
CTA
decision
in
division,
the
petition
that
must
be
filed
is
under
Rule
43.
Q:
Is
a
motion
for
reconsideration
mandatory
(on
the
CTA
divisions
ruling)
before
you
can
elevate
it
to
CTA
en
banc?
A:
Rule
08
of
the
Rules
of
the
CTA
states
that
MR
is
mandatory.
Q:
Is
a
motion
for
extension
of
time
to
file
a
petition
for
review
under
Rule
45,
is
this
allowed?
A:
Yes.
3.
CTA
en
banc
to
Supreme
Court
*CTA
en
banc
decision
is
the
one
that
may
be
elevated
to
the
Supreme
Court.
Q:
What
is
the
applicable
prescriptive
period?
A:
Rule
16
of
the
Rules
of
the
CTA
pursuant
to
RA
9282
provides
for
15-day
period
(15
days
from
the
receipt
of
the
decision
of
the
CTA
en
banc)
Q:
Is
a
motion
for
reconsideration
allowed
(on
the
CTA
en
bancs
ruling)
before
you
can
elevate
it
to
SC?
A:
Rule
16
of
the
Rules
of
the
CTA
provides
that
the
taxpayer
may
file
an
MR.
Q:
Is
a
motion
for
extension
of
time
to
file
a
petition
for
review
under
Rule
45,
is
this
allowed?
A:
Yes.
Discussion:
*
Unlike
in
protest
where
there
is
a
form
prescribed,
in
refund
there
is
no
standard
form
for
this;
SC
has
emphasized
that
the
tax
refund
must
contain
the
following:
3
indispensible
requisites
of
tax
refund:
1. It
must
be
in
writing
/
written
claim
for
refund;
2. There
must
be
categorical
demand
for
the
reimbursement
of
the
taxes
illegally
or
erroneously
collected;
3. It
must
be
filed
within
the
2-year
period
from
the
date
of
payment;
12
(the
dates
that
are
supposed
to
confuse
you
should
be
ignored
such
as:
1st,
2nd,
3rd
quarterly
returns
were
filed;
focus
on
when
FAR
was
filed.)
2.
CIR
vs.
CA
-
CTA
here
committed
a
blunder
in
applying
the
2-year
period
-
The
return
here
was
filed
on
April
02,
1986;
-
The
CTA
considered
April
15,
1988
as
the
deadline;
This
is
wrong!
-
It
is
the
date
of
payment
that
is
material,
do
not
consider
the
deadline
because
that
only
becomes
material
in
assessment
under
Section
203;
3.
BPI
Case
(in
relation
to
Corporation
Law:
dissolving
corporations)
-
Dissolving
corporation
filing
for
a
refund
-
Effect
of
the
dissolution:
it
shortens
the
taxable
period
-
SC
in
construing
Section
52(c),
look
for
this:
when
was
the
approval
for
the
plan
for
dissolution
given?
-
this
is
the
material
date;
SC:
From
the
date
of
the
approval
count
30
days
thereafter,
this
is
the
reckoning
date
for
the
2
year
period.
-
Suppose
leap
year
intervenes,
ignore
that.
Because
jurisprudence
tells
us
that
you
do
not
apply
the
provisions
of
the
Civil
Code,
you
apply
the
Revised
Administrative
Code
of
1987,
Section
31
Chapter
08,
wherein
it
defines
1
year
to
be
constituted
of
12
months,
ignore
the
number
of
days;
lex
posteriori
derogat
priori:
the
recent
law
prevails
over
prior
law
4.
Suppose
it
involves
VAT,
the
2-year
period
will
be
reckoned
from
the
close
of
the
taxable
quarter;
1.
The
decision
of
the
BIR
on
tax
refund
is
appealable
to
the
CTA
division;
-
Petition
for
review
under
Rule
42
raising
questions
of
law
or
fact;
-
According
to
Rule
04,
Section
3(a)(2),
when
you
appeal
the
BIR
decision
on
tax
refund,
observe
these
two
periods:
a.
30
days
from
receipt
of
the
BIR
decision
denying
the
written
claim
for
refund;
and
b.
it
must
be
filed
within
2-years
from
the
date
of
payment
-
SC:
General
Rule:
The
2-year
period
from
the
date
of
payment
applies:
b.1.
to
the
filing
of
written
claim
for
refund
before
the
BIR;
b.2.
when
a
petition
for
review
of
the
BIR
decision
denying
the
claim
for
refund
is
filed
before
the
CTA
Exceptions:
2-year
period
is
not
observed
under
the
following
situations:
1.
a.
precursor
case:
Aichi
Case:
Refund
of
VAT
or
issuance
of
tax
credit
in
regard
to
unutilized
input
tax
-
the
2-year
period
is
not
applicable
here
-
SC:
construed
Section
112(c)
of
the
NIRC
-
SC:
there
is
only
one
period
that
must
be
observed
here,
the
30-day
period;
-
take
note
of
the
120-day
period
within
which
the
BIR
may
render
a
decision
-
Effect:
a.
30
days
from
receipt
of
the
decision
rendered
within
120
days:
you
may
file
a
petition
for
review
under
Rule
42
b.
BIR
did
not
render
any
decision/
inaction
within
the
120-day
period
you
may
appeal
such
inaction
within
30-days
from
the
lapse
or
expiration
of
the
120-day
period
c.
Justice
Peralta:
Even
if
the
decision
was
rendered
beyond
the
120-day
period,
given
that
the
2-year
Period
is
not
applicable,
the
taxpayer
can
still
avail
of
appeal;
Forget
about
the
2-year
period
in
refund
of
VAT.
13
2.
The
decision
of
CTA
division
is
appealable
to
the
CTA
en
banc;
-
apply
the
15-day
period
under
Rule
08
of
the
Rules
of
the
CTA
*
Minimum
Compromise
Rate
means
not
lower
than
10/40%
of
the
total
tax
liability
but
it
may
be
more
than
because
that
is
favorable
to
the
government
*
7
Cases
which
may
not
be
compromised:
WAAFFER
1.
Withholding
tax
cases
2.
Actually
filed
criminal
cases
in
court
(even
if
no
fraud
is
involved)
3.
Approved
scheduled
payments
on
installments
4.
Fraud
in
criminal
cases
/
criminal
fraud
cases
5.
Final
judgment
of
the
court
6.
Estate
tax
cases
if
the
request
for
compromise
is
based
on
financial
incapacity
7.
Report
(final)
regarding
request
for
reinvestigation
or
reconsideration
-
situation
here:
taxpayer
agreed
to
such
final
report
and
his
signature
on
that
agreement
is
binding
upon
him
therefore
he
is
estopped
from
raising
this
ground
for
compromise
14
========================================================================================
INCOME TAX
========================================================================================
*
4
Rules:
1.
Sources
of
income;
2.
Tax
Base
(whether
you
can
claim
deductions
or
not);
3.
Income
Tax
Rates;
4.
Filing
of
income
tax
return;
*
2
Basic
categories
of
taxpayers:
1.
Individual
Taxpayers;
-
Section
61:
taxable
income
of
estates
and
trust
shall
be
computed
in
the
same
manner
and
on
the
same
basis
as
individuals
subject
to
3
exceptions;
2.
Corporate
Taxpayers;
Basis:
Tan
vs.
Del
Rosario
JR.
(237
SCRA
324,
October
3,
1994
SC:
recognized
2
systems
of
income
system:
1.
Schedular:
System/
Approach/Tax
treatment
(all
these
3
terms
refer
to
the
same
concept)
v Jurisprudential
Definition:
Schedular
approach
system
it
is
a
system
employed
where
the
income
tax
treatment
varies
and
made
to
depend
on
the
kind
or
category
of
taxable
income
of
the
taxpayer.
v Simplified
Definition:
it
is
a
system
that
categorizes
income
and
provides
for
different
tax
rules
Varies
different
tax
rules
Made
to
depend
merely
classifies/categorzes
income
you
must
first
classify
the
income
before
you
can
apply
different
tax
rules
v Passive
income
o Dont
report
in
ITR
o Subject
to
final
tax
2.
Global:
System/
Approach/Tax
treatment
(all
these
3
terms
refer
to
the
same
concept)
v Jurisprudential
Definition:
it
is
a
system
employed
where
the
tax
treatment
views
indifferently
the
tax
base
and
generally
treats
in
common
all
categorizes
of
taxable
income
of
the
taxpayer
v Simplified
Definition:
it
is
a
system
that
provides
for
uniform
tax
rules
and
does
not
generally
classify
nor
categorize
income
views
indifferently
uniform
tax
rules
15
generally
treats
in
common
all
categorizes
of
taxable
income
of
the
taxpayer
global
system
does
not
generally
classify
or
categorize
income
a.
As
to
Tax
Treatment:
SCHEDULER
SYSTEM:
different
tax
rules;
GLOBAL
SYSTEM:
uniform
tax
rules
b.
As
to
Categorization:
SCHEDULER
SYSTEM:
classifies/categorizes
GLOBAL
SYSTEM:
does
not
generally
classify/categorizes
c.
As
to
Tax
Rates:
SCHEDULER
SYSTEM:
it
imposes
different
tax
rates
GLOBAL
SYSTEM:
d.
As
to
Taxpayers
Covered:
SCHEDULER
SYSTEM:
individual
GLOBAL
SYSTEM:
corporate
II.
TWO
METHODS
ADOPTED
UNDER
NIRC
Net
Income
Taxation
Characteristics
/
Features
1. It
allows
deductions
(Sec
34)
1.
It
allows
NO
deductions
2. It
grants
personal
exemptions
(Sec
35)
2.
It
grants
no
personal
exemptions
3. Tax
Base:
Taxable
Income
(Section
31)
3.
Tax
Base:
Gross
Income
(Section
25B)
Jurisprudential
Definition
of
Gross
Income:
Blacks
Law
Total
income
from
all
sources
minus
deductions,
Total
income
from
all
sources
before
deductions
exemptions
or
other
tax
reductions
exemptions
and
other
tax
reductions
Deductions
Taxpayers
Entitled
to
Deductions:
Taxpayers
NOT
Entitled
to
Deductions:
4
individual
TP
&
2
Corporate
TP
1
Individual;
1
Corporate
A.
Individual
Taxpayers
A.
NRA-NETB
>
whose
stay
is
not
more
than
180d
1.
RC
(Section
24a1a)
>
entitled
to
personal
exemptions
B.
NRFC
>
Section
23:
entitled
to
deduct
expenses
>
because
the
tax
base
is
gross
without
since
he
can
be
taxed
on
income
derived
within
and
without
2.
NRC
(Section24a1b)
>
he
can
claim
deductions
>
entitled
to
personal
exemptions
>
Can
he
claim
expenses
incurred
without?
No,
since
he
can
only
be
taxed
could
only
16
3.
4.
17
18
resident
citizens
can
be
taxed
not
only
from
income
derived
from
sources
within
but
also
income
derived
from
sources
without;
*
There
is
only
one
individual
taxpayer
whose
income
derived
from
sources
without
(global
income)
that
may
be
taxed:
resident
citizen,
all
the
rest
only
income
within
b.
Corporate
taxpayers,
there
are
three:
Domestic
Corporation,
Resident
Foreign
Corporation,
Non-resident
Foreign
Corporation
Corporate
taxpayers
are
taxable
on
income
derived
from
sources
within,
except
DC
because
domestic
corporations
can
be
taxed
not
only
from
income
derived
from
sources
within
but
also
income
derived
from
sources
without;
IV.
Tax
Base
*
Questions
themed
as
whether
or
not
this
taxpayer
can
claim
deductions,
you
should
take
note
of
this
tax
base,
if:
Taxable
income
it
means
deductions
are
allowed.
Gross
income
implies
that
no
deductions
are
allowed.
A.
Individual
Taxpayers
-
Can
claim
deductions
as
the
tax
base
is
taxable
income
except
NRA-NETB
because
the
tax
base
is
gross
income/
entire
income
-
NRA-NETB
cannot
claim
deductions
and
personal
exemptions;
*
He
is
considered
as
NETB
because
his
aggregate
stay
in
the
Philippines
is
180
days
or
less;
*
If
his
aggregate
stay
in
the
Philippines
is
more
than
180
days
then
he
is
considered
as
ETB
then
he
can
claim
deductions;
B.
Corporate
Taxpayers
-
Can
claim
deductions
as
the
tax
base
is
taxable
income
except
NRFC
as
their
tax
base
is
gross
income;
V.
Tax
Rates
A.
Individual
Taxpayers
-
Subject
to
progressive
rates
of
5-32%
except
NRA-NETB
because
the
applicable
rate
to
them
is
25%
final
tax;
B.
Corporate
Taxpayers
-
DC
&
RFC
are
subject
to
corporate/regular/normal
corporate
rate
of
30%
except
NRFC
because
in
their
case,
the
30%
becomes
a
final
tax;
VI.
Filing
of
Income
Tax
Returns
A.
Individual
Taxpayers
-
Required
to
file
income
tax
returns
except
NRA-NETB
because
they
are
subject
20%
is
a
final
tax,
apply
the
rule:
final
tax
withheld
constitutes
as
final
or
full
settlement
of
the
tax
liabilities
on
those
items
of
income,
therefore
no
return
is
required
to
be
filed;
B.
Corporate
Taxpayers
-
Required
to
file
quarterly
corporate
income
tax
return
except
NRFC
because
in
as
much
as
the
30%
is
a
final
tax
it
is
likewise
considered
as
the
full
settlement
of
the
tax
liability;
therefore,
NRFCs
are
not
required
to
file
quarterly
corporate
income
tax
returns;
VII.
Notes
*
Tan
vs.
Del
Rosario
JR:
Jurisprudential
Definition
of
situs:
RPN
(section
23)
>
comprehensive
income
tax
situs
>
Residence
-
criteria
in
imposing
tax
on
the
income
of:
RC,
RA,
RFC
Place
-
criteria
in
imposing
tax
on
the
income
of:
NRC,
NRA,
NRFC
Nationality/citizenship
of
the
taxpayer
- criteria in imposing tax on the income of (irrespective of the source of income): RC, DC,
19
3.
The
filing
of
ITR,
the
method
that
may
be
developed
as
provided
for
in
Section
51,
75,
76
and
77:
Pay
as
you
File
System
(section
57A1)
-
you
pay
your
income
tax
when
you
file
your
income
tax
return;
-
How
often
do
you
file?
a.
Individual
taxpayer:
Section
51C:
Annual
Filing
of
income
tax:
Deadline
April
15
b.
Corporate
taxpayer:
Section
77C:
procedure
b.1.
DC
shall
file/declare
its
quarterly
income
tax
return
in
the
1st,
2nd
and
3rd
quarters
in
a
cumulative
basis;
carry
over
in
simple
language
b.2.
DC
shall
then
file
its
Final
Adjustment
Return,
setting
forth
all
the
adjustments
in
its
income
and
expenses
for
the
entire
year
*
applies
only
to
individual
taxpayers
regardless
of
the
amount
of
income
received
as
long
as
the
following
are
met:
5.
Statistics
*
more
questions
are
asked
on
individual
taxpayers
than
corporate
taxpayers;
6.
Basis
of
the
government
to
collect:
Partnership
Theory
The
right
of
the
government
to
collect
taxes
emanates
form
the
partnership
in
the
production
of
income
b
providing
protection,
resources
and
incentives
and
proper
climate
for
the
production
of
income.
7.
Tests
of
Taxable
Income:
Filipinas
Synthetic
Fiber
Corp.
vs.
CA
316
SCRA
480
VS.
>
Share
of
a
business
partner
from
the
net
income
after
tax
of
a
taxable
business
partnership
=
taxable
as
long
as
he
has
the
right
to
receive
(Section
73D);
>Probable
Bar!
20
C.
All
Events
Test
(Filipinas
Synthetic
Fiber
Corp.
vs.
CA
316
SCRA
480)
>
applies
to
deductibility
of
expense
>
requisites:
USA
so
that
amount
may
be
considered
as
taxable:
Unconditional,
valid
and
enforceable,
not
subject
to
any
future
time
Susceptible:
the
amount
is
susceptible
of
reasonable
estimate
/
reasonable
accuracy
Amount:
reasonable
expectation
that
amount
will
be
paid
in
due
course
8.
Basis
of
Computation
of
Taxpayers
Income
(Section
43)
*
It
shall
be
based
on
the
taxpayers
annual
accounting
period.
*
Correlate
with
Section
22
p
and
q
*
2
Accounting
Periods
a.
Calendar
Year
-
January
to
December
b.
Fiscal
Year
-
ending
on
any
month
other
than
December
*
Q:
Are
all
taxpayers
allowed
to
adopt
these
periods?
A:
Only
corporate
taxpayers
may
employ
or
adopt
fiscal
year
period.
9.
Two
Methods
of
Collection
of
Income
Tax
Creditable
Withholding
Tax
Final
Withholding
Tax
(Section
57A)
(Section
57B)
Withholding
Agent
is:
1.
Agent
of
the
government
2.
Agent
of
the
taxpayer
*Withholding
agent
has
the
legal
personality
to
file
a
claim
for
refund.
>
allowed
because
it
is
not
only
an
agent
of
the
government
in
the
collection
of
tax
but
also
an
agent
of
the
taxpayer
in
the
withholding
of
tax.
Such
being
the
case,
it
is
technically
considered
a
taxpayer.
Prizes
-
threshold
amount:
more
than
10,000
to
be
subject
to
final
tax
Winnings
-
except
lotto
and
PCSO
winnings
-
no
threshold
amount
Interest
Income
-
from
bank
deposits
(PH
currency
or
FX)
21
Cancellation
Life
insurance
11.
Misc:
*
Claim
of
right
doctrine:
income
derived
from
legal
or
illegal
sources
are
taxable
(derived
from
whatever
source)
*
GR:
Payment
by
mistake
not
taxable
because
of
the
obligation
to
return
it
XPN:
the
recipient
can
dispose
=
taxable
*
GR:
Trust
not
taxable
XPN:
the
recipient
can
freely
dispose
=
taxable
22
==========================================================================================
INDIVIDUAL
TAXPAYERS
==========================================================================================
I.
Compensation
Income
Cancellation,
forgiveness,
renunciation
of
indebtedness
or
obligation
Tax
Implications/Consequence/Incidence
Basis:
Section
33B(10)
Insured
Employee:
3
Tax
Implications
of
Cancellation,etc:
A.
Compensation
income
Creditor
Employer:
condoned
the
EE
in
consideration
of
services
rendered
>
amounts
to
taxable
compensation
income
B.
Donation
Creditor
Any
Person:
condoned
the
EE
in
consideration
of
services
rendered
>
amounts
to
table
donation
>
donors
tax
Debtor/Donee:
Not
subject
to
income
tax;
C.
Capital
Transaction
Debtor
Stockholder:
Indirect
dividend
on
his
part
that
is
considered
taxable;
Creditor
Corporation:
Condoned
the
obligation
of
SH;
23
5-32%
Dont
memorize!
Basta
Final
tax
rates
Reporting
Requirement
Must
be
reported
Need
not
be
reported
since
final
tax
Paid
by
employer
[SORRY
AYAW
MA-DELETE
NUNG
EXTRA
SPACES]
*
Gross
Compensation
Income
-
all
remuneration
for
services
performed
by
an
employee
for
his
employer
under
that
Ee-Er
relationship
unless
specifically
excluded
by
the
tax
code
*
4
Fold
Test
to
Determine
Ee-Er
Relationship
SPDC
Selection
Payment:
Compensation
Dismissal
Control
Test
*
Another
rule
that
only
applies
to
individual
taxpayers:
-
From
gross
compensation
income,
individual
taxpayers
can
deduct
personal
exemptions
(section
35);
-
Remember
3
items
are
deductible
from
gross
compensation
income
(before
there
are
2):
24
claiming
the
additional
personal
exemption
*
Section
35(C):
Change
of
Status:
-
additional
dependent
comes
during
the
taxable
year,
he
may
claim
the
additional
exemption
of
25,000;
-
death
of
the
dependent;
-
dependent
becoming
21
y/o
during
the
taxable
year;
-
marriage
of
the
dependent
during
the
taxable
year;
-
gainful
employment
during
the
taxable
year;
>
uniform
answer:
despite
these
events
the
taxpayer
may
still
claim
the
additional
personal
exemption
of
25,000
>
all
these
events
occurred
at
the
close
of
the
taxable
year;
II.
Fringe
Benefits
*
Tax
Base:
Grossed
Up
Monetary
value;
tax
rates:
final
tax
rates;
paid
by
employer
*
must
be
correlated
with
the
rules
on
compensation
income;
*
remember
that
compensation
income
is
subject
to
5-32%
and
that
income
must
be
reported
by
the
compensation
earner;
VS.
*
fringe
benefits
are
subject
to
final
tax,
therefore
the
managerial
or
supervisory
employee
are
not
required
to
report
such;
*
Fringe
Benefits:
HEV/HIM/EHEL
Housing
Expense
Account
Vehicle
Household
personnel
Interest
on
Loan
Benefit
Membership
benefit
Expenses
for
foreign
travel
Holiday
and
vacay
expenses
Educational
benefit
Life
insurance
premiums
> RR 3-98 provides for exempt housing units (not found in the Tax Code)
>
Housing
unit
that
is
situated
within
the
business
premises
of
the
ER
(Collector
vs.
Henderson)
1.
Convenience
of
the
Employer
Rule:
-
Any
benefit
or
given
or
granted
for
the
convenience
of
the
ER
is
exempt,
this
includes
the
monetary
value
of
the
housing
unit
situated
within
the
premises
of
the
ER
-
exempt
because
it
is
granted
for
the
convenience
of
ER
pursuant
to
this
rule
2.
Adjacent
Housing
Unit:
-
Exempt?
It
depends:
*
yes,
provided
located
maximum
of
50m
within
the
perimeter
of
the
business
premises
*
expanded
concept
of
the
fringe
benefit
of
housing
unit
3.
Temporary
Housing
Unit:
-
Exempt?
It
depends:
*
yes,
if
the
length
of
stay
is
3
months
or
less;
if
more
than
3
months
no
longer
exempt
4.
Military
Housing
Unit
-
Exempt?
It
depends:
*
yes,
pursuant
to
the
state
policy
to
provide
housing
within
the
military
camp
so
that
they
may
be
on
call
to
meet
the
exigencies
of
military
service
*
Covered
by
7
Revenue
Regulations:
3-98,
10-200;
5-2008;
10-2008;
5-2011;
8-2012;
1-2015
*
Characterisics/Features;
Purpose
1. To
promote:
CHEG
>
Contentment
Health,
Efficiency
and
Good
will
2. Of
relatively
small
value
25
NOTE:
If
what
you
see
in
the
problem,
the
recipient
of
this
monetized
value
of
sick
and
vacation
credits
is:
Government
employee
you
can
immediately
answer
this
as
FULLY
exempt
(no
more
limitations/qualifications);
Do
not
apply
the
10-day
period;
Private
employee
you
have
to
qualify,
because
it
is
exempt
only
up
to
the
10-day
vacation
leave
credits
in
excess
of
the
10-day
period,
that
is
already
taxable;
sick
leave
credits:
irrespective
of
the
number
of
days
that
is
taxable.
10,000
in
the
form
of
(1)
CBA
Benefits;
or
(2)
productivity
scheme
benefits
*
Most
Recent
Item
declared
exempt
de
minimis
benefits
(as
of
January
2015):
*
Probable
Bar:
New
Threshold
Amounts
to
be
tax
exempt
1.
Christmas
Gift/Bonus
Threshold:
5,000
(not
taxable)
>
answers
WON
Christmas
pay
is
taxable
2.
Lump
Sum
Limitation:
82,000
(no
longer
30,000)
>
covers:
13th
moth
pay,
Christmas
pay/bonus,
and
3.
Clothing
allowance/
uniform
benefit:
5,000/year
=
exempt;
4.
Employees
Achievement
award
(promote
efficiency)
=
10,000
lump
sum
5.
Yearly
medical
=
not
more
than
10,000
6.
Anniversary
=
5,000
7.
Meal
allowance
for
overtime
work
(includes
graveyard
shift)
=
not
more
than
25%
of
the
minimum
pay
8.
Cash
medical
benefits
given
to
dependents
of
employees
=
125
*
Now
there
are
now
11
exempt
de
minimis
benefits;
exclusive
list
IV.
GROSS
INCOME
*
Self-Employment
Income
covers:
1.
Business
or
trade
income;
2.
Professional
income
3.
share
of
partner
from
the
income
of
the
partnership
26
4.
34
AmJur
92
A
capital
asset
ceases
to
be
one
if
its
substantially
improved,
actively
sold,
or
both.
Presumed
to
be
held
primarily
for
sale
in
the
ordinary
course
of
business.
-
applies
to
both
individual
and
corporate
taxpayers
except
bank
and
trust
companies
IX.
Net
Capital
Loss
Carry
Over
27
NELCO
(39D)
NOLCO
(34d3)
Taxpayers
covered
Individual
taxpayers
No
distinction
Transactions
covered
Capital
transactions
Ordinary
transactions
Period
succeeding
year
>
only
1
3
consecutive
years
year
*mining
corporations:
up
to
5
X.
Dividend
Income
(Sec
32
A(7))
Cases/Situations:
Dividends
income
is:
Tax
Exempt
1.
Liquidating
dividends
>
mere
return
of
capital
XI.
Frequently
Asked
Question
in
32B:
Tax
Implication
Income
Tax
Excluded
(not
subject
to
income
tax)
Excluded
(not
subject
to
income
tax)
28
Donee
1.
donees
tax
has
been
abolished
by
PD
69;
Inter
vivos
Mortis
causa
2.
no
income
tax:
by
express
provision
by
law
excluded
*
Q:
Are
moral
and
exemplary
damages
taxable?
A:
Exempt
from
income
tax
because
there
is
no
realized
gain
or
profit.
Basis:
Article
2217
&
2229
of
civil
code
Separation pay
Requirements
Only
one
condition:
Received
on
account
of
cause
beyond
the
control
of
the
employee
-
economic
crisis,
-
compulsory
retirement:
2.
length
of
service:
at
least
10
years
*
terminal
leave
pay
=
exempt
of
service
(received
under
a
compulsory
3.
age:
at
least
50
years
retirement
judicially
declared
by
4.
limitation:
availed
of
only
one
the
SC
as
cause
beyond
the
EEs
>
subsequent
retirement
benefit
received
control)
from
another
private
employer
is
tax
exempt;
if
subsequent
employer
is
1.
source
of
payment:
no
requirement
the
government
the
limitation
does
2.
length
of
service:
no
requirement
not
apply
3.
age:
no
requirement
4.
limitation:
no
limitation
4
conditions:
1.
source
of
payment:
paid
under
BIR
approved
retirement
plan
5.
Miscellaneous
Items:
(a)
Section
32B7(a)
(b)
Section
32B7(b)
29
Section
32B7(c)
Section
32B7(d)
Awards
,
prizes
Awards:
athletes,
etc.
Requirements
to
be
Tax
Exempt
1.
To
be
exempt
award
Competition
must
be
must
be
received:
sanctioned
by
National
SCRA-LEC
Sports
Association:
Scientific
Charitable
Other
Tax
Implications:
Religious
Basis:
RA
7549
Artistic
not
Tax
Code
Literary
1.
Recipient
athlete
of
Educational
civi
the
award:
Civic
tax
exempt
2.
There
must
be
no
2.
donor/contributor:
action
on
the
part
of
exempt
from
donors
the
recipient
tax
3.
Must
be
received
3.
donor/contributor:
unconditionally
can
claim
award
as
deduction
from
gross
icome
==========================================================================================
CORPORATE
TAXPAYERS
==========================================================================================
*
YMCA
Doctrine:
(before
this
is
the
St.
Lukes
Doctrine)
> Sec30 last paragraph: memorize: (basis why YMCA was taxed on its rent income)
>
YMCA
is
a
charitable
institution
and
religious
organization,
but
nonetheless
the
Supreme
Court
ruled
that
it
can
be
taxed
on
rent
income
derived
from
the
lease
of
its
properties;
It
can
still
be
taxed
on
interest
income
from
its
bank
deposits
subject
to
20%;
it
can
still
be
taxed
on
income
derived
from
gain
from
sale
or
exchange
of
real
or
personal
properties;
*
St.
Lukes
is
a
charitable
institution
but
cannot
invoke
the
exemption
under
Section
30;
it
is
taxable
at
10%
as
nonprofit
hospital
because
one
of
the
requisites
in
NOON
was
not
met;
d.)
No
part
of
its
income
hall
belong
to
or
insure
to
the
benefit
of
the
member,
organizer
*
Therefore,
Section
27(B)
is
the
law
applicable:
*
Preferential
rate
of
10%
is
applicable
to
St.
Lukes
Medical
Center
*
Section
30(h):
Non-stock,
non
profit
Educational
Institutions
a.
Interest
Income:
Test
of
Exemption:
Use
if
interest
income
proven
to
be
ADE
used
for
educational
purpose
=
exempt
1.
18
Exempt
Corporations
30
Section
22B:
3
corporations
1.
GPP
2.
Joint
Construction
Venture
3.
Joint
Consortium
Conditions
to
be
exempt
2.
Significant
Corporate
Rules:
MCIT,
IAET,
Tax
Sparing
Credit
Rule
>
Persons
covered:
DC,
RC
(NRFC
=
not
covered)
>
Tax
Rate:
2%;
Tax
Base:
gross
income
>
Purpose:
To
forestall
the
prevailing
practice
of
corporations
of
over
claiming
deductions
in
order
to
reduce
income
tax
payments
>
Creba
vs.
Romulo:
Its
not
a
tax
on
capital,
its
a
tax
on
income
and
the
basis
is
gross
income.
>
4-year
Rule:
MCIT
applies
only
to
the
4th
year
of
corporate
existence
because
the
law
recognizes
that
the
first
3
years
is
still
the
adjustment
period/time
to
recover
>
If
a
domestic
corporation
sustained
a
net
loss
or
it
has
no
taxable
income,
it
is
liable
to
pay
MCIT
because
the
basis
is
gross
income
>
If
MCIT
is
more
than
the
normal
income
tax,
apply
the
carry
forward
feature
-
the
excess
MCIT
can
be
carried
over
to
the
succeeding
3
consecutive
years
>
The
Secretary
of
Finance
may,
on
equitable
grounds,
suspend
the
application
of
MCIT:
>
Immediacy
Test:
test
applied
to
determine
whether
the
corporation
has
used
the
surplus
or
corporate
profits
for
the
reasonably
anticipated
needs/immediate
needs
of
its
business,
if
yes,
this
tax
cannot
be
imposed.
c.
Tax
Sparing
Credit
Rule
>
Tax
Base:
amount
of
cash
or
property
dividend
31
3.
Common
Income
Tax
Rules
(applies
to
both
Individual
and
Corporate
TP)
a.
b.
GR:
Capital
loss
is
only
deductible
to
capital
gain
(not
to
ordinary
gain)
32
5. escrow agreement
d.
1.
Listed: of 1% of the gross selling price (considered as percentage tax not an income tax)
2.
>
It
is
enough
to
know
that
this
involves
capital
transactions
that
if
the
stocks
are:
Listed:
subject
to
percentage
taxes
Not
listed:
subject
to
final
tax
rates
4.
Common
Organizations:
REC
-
exempt
-
not
exempt
Exemptions
from:
Religious
Corporate
Income
Tax
Real
Property
Tax
provided ADE
Educational:
Donors Tax
Estate Tax
(see
enumeration
below)
(see
enumeration
below)
VAT
Private
Non-stock
Non-profit
Government
Charitable
provided
ADE
provided
ADE
provided ADE
provided ADE
*10
Exempt
Donations
(inter
vivos
donations
given
to
these
organizations
are
not
subject
to
donors
tax):
CARTER-CPSS
Charitable
organixation
Accredited
non-government
organizations
Religious
organizations
Trust
foundations/organization
Educational
organization
(non-stock,
non-profit)
Research
organizations
Cultural
organization
Philantropic
Social
welfare
organizations
RA
7549:
contributions
given
to
Sports
competitions
*3
Exempt
Donations
(mortis
causa
donations
given
to
these
organizations
are
not
subject
to
estate
tax):
CSC
Charitable
organixation
Social
welfare
organizations
Cultural
organization
33
5.
Allowable
Deductions
Optional
Standard
Deduction
Itemized Deduction
Amendments
by
RA
9504:
Rate:
40%
(before
30%)
Base:
Individual
Taxpayers:
Gross
sales/receipts
(gross
income
Corporate
Taxpayers:
Gross
Income
(before
not
available
to
corporate)
Once
OSD
is
chosen,
the
choice
is
irrevocable
for
the
taxable
year;
(see
codal)
(mas
favorite
ang
OSD)
*Tests:
WON
Expense
is
deductible
1.
Section
34a1a:
Development
Operation
Management
or
conduct
of
the
business
2.
Atlas
Development
vs.
Commissioner
Recapitalization/reorganization
costs
are
not
deductible
3.
Esso
Standard
vs.
Commissioner
Test
of
production
of
income
not
in
the
disposition
of
income:
If
incurred
for
this,
deductible
4.
Isabela
Drug
case
All
Events
Test
1. amount
can
be
fixed
with
reasonable
accuracy
2. liability
to
pay
must
be
based
on
agreement
or
contract
5.
General
food
Inc
vs.
Commissioner
expenses
paid
or
incurred
to
protect
brand
or
franchise
is
not
deductible
because
it
partakes
the
nature
of
capital
transaction
*
Recovery
of
debts
previously
written
off
to
be
deductible/
Bad
Debts
Expense:
SC:
Requisites
to
be
deductible:
1. Such
amount
is
uncollectible
in
the
future
(there
must
be
proof);
2. There
must
be
earnest
efforts
exerted
before
you
can
claim
bad
debts
as
deductible;
Earnest
efforts:
send
(1)
statement
of
account
to
debtor,
(2)
collection
letter;
(3)
refer
to
lawyer;
(4)
file
collection
case
*
Tax
Refund:
To
be
considered
as
taxable
when
refunded,
it
must
be:
a.
it
must
be
a
deductible
tax
*non-deductible
tax
if
refunded:
special
assessment,
income
tax,
donors
tax,
estate
tax
b.
it
must
be
actually
claimed
6.
Interest
Income:
*
Non-deductible
Interest
Income:
1.
Capital
2.
PICOP
vs.
CIR:
theoretical
interest
is
non-deductible
because:
a.
not
based
or
incurred,
merely
computed
b.
not
arising
from
interest
bearing
obligation
*
Tax
Situs
of
Interest
Income:
residence
of
the
debtor
34
b.
Marriage
of
dependent
during
the
taxable
year
or
Gainful
employment
(still
qualified
as
dependent)
*
basis:
Section
35C
last
part:
by
legal
fiction/contemplation
of
law
35