UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW SYLLABUS TAX 1 - INCOME TAXATION 1 SEM, A.Y. 2011-2012 Prof. Dina D.

Lucenario Section III-C Saturdays, 2:00 - 5:00pm Suggested References: Casasola & Bcrnaldo, National Internal Revenue Code of 1997,2009 ed. Aban, Law of Basic Taxation in the Philippines, rev. ed. /0? - stttJ t J JJ D i r n a a r n p a o , Ta x P r i n c i p l e s a n d R e m e d i e s , 2 0 1 0 e d . , ' 1 ' Domondon, Taxation vol. I (General Principles), 2009 ed. ?e% ' e ^ ^^"i SJt ft? <vx (f ) ^ afUr pa* Mamalateo, Reviewer on Taxation, 2008 ed. Vitug & Acosta, Tax Law and Jurisprudence, 2006 ed. Mamalateo, Philippine Income Tax, 2004 ed. /Valencia, Income Taxation, 5th ed. Domondon, Taxation vol. II (Income Taxation), 2009 ed.

PART A: GENERAL PRINCIPLES OF TAXATION I. Taxation A. Denition B. Nature of Internal Revenue Law - Hilado v CIR 100 Phil 288 C. Scope and Nature of Taxation C&im<*^ - Sec. 28, Art. VI, 1987 Constitution (M\UoV*i - Sison v Ancheta, 130 SCRA 654 ? \t^. - CIR v Pineda, 21 SCRA 105 S(X - Phil. Guaranty v CIR, 13 SCRA 775 ^ - Collector vYuseco, 3 SCRA 313 - CIR v Algue, Inc., L-28896, Feb. 17,1988 D. Underlying Theory and Basis; Necessity Theory; Benet-Received Principle - 71 Am ]ur2"d 346-347 - Commissioner v. Algue, 158 SCRA 9 - NPC v. Cabanatuan, GR149110, April 19,2003 - Lorenzo v. Posadas, 64 Phil 353 E. Purpose of Taxation General / Fiscal/ Revenue - Commissioner v. Algue, supra June 18,2011 Session

- PAL v. Edu, 164 SCRA 320 - Tolentino v. Secretary of Finance, 235 SCRA 630; 249 SCRA 628 Non-revenue/Special or Regulatory - Osmena v. Orbos, 220 SCRA 703 - Caltex v. COA, 208 SCRA 755 F. Principles of a Sound Tax System - Chavez vOngpin, 186 SCRA 331 - Taganito Mining v. CIR, CTA Case 4702, April 28,1995 G. Comparison with Police Power and Eminent Domain - Roxas v. CTA, 23 SCRA 276 - Tanada v. Angara, GR118295, May 2,1997 - LTO v. City of Butuan, GR 131512, Jan. 20,2000 - Phil Match Co. v. Cebu, 81 SCRA 99 - Matalin v Mun. Council of Malabang, 143 SCRA 404 - Lutzv. Araneta, 98 Phil 48 - NTCv.CA, 311 SCRA 508 II. Taxes A. Denition - 71 Am Jur2 343-346 B. Essential Characteristics of Taxes - Tan v. Del Rosario, 237 SCRA 324 - CIR v. Santos, GR 119252, Aug. 18,1997 C. Taxes distinguished from: 1. Debts - Caltex v COA, 208 SCRA 726 - Francia v IAC, 162 SCRA 735 - RP v Ericta and Sampaguita Pictures, 172 SCRA 653 - Republic v. Mambulao Lumber Company, 4 SCRA 622 - Philex Mining v. CIR, GR 125704, August 28,1998 - Domingo v Carlitos, 8 SCRA 443 - &Afc li **} , 2. License Fees - Progressive Dev. Corp. v QC, 172 SCRA 629 - PAL v Edu, 164 SCRA 320 - ESSOvCIR,175SCRA149 3. Special Assessments/Levies - Apostolic Prefect v Treasurer of Baguio, 71 Phil. 547 - 71 Amjur351 5. Penalties - NDC v CIR 151, SCRA 472 6. Custom Duties D. Tax Evasion; Tax Avoidance - Sec. 254, NIRC - Republic v.Gonzales, 13 SCRA 633 - Delpher Traders v. IAC, 157 SCRA 349 - CIR v. Lincoln Philippine Life, GR 119176, Mar. 19,2002 June 25,2011 Session in. Sources of Tax Law
4. Tolls

A. Constitution B. Statutes - RA 8424, as amended - RA 9337 - Tariff and Customs Code - Book II, Local Government Code - Special Laws C Administrative Issuances - BIR Revenue Administrative Order (RAO) No. 1-2003 - Revenue Regulations - Sees. 244 - 245, NIRC - Revenue Administrative Order 01-03 - Revenue Memorandum Circular 20-86 - Art. .7, Civil Code - Asturias Sugar Central v Comm., 29 SCRA 617 - Tan v. Del Rosario, 237 SCRA 234 - CIR v. Seagate Technology, GR 153866, Feb. 11,2005 BIR Rulings - Sees. 4,246, NIRC - CIR v Burroughs Ltd., G.R. 66653, June 19,1986 - CIR v Mega Gen. Merchandising, 166 SCRA 166 - PBCOM vs. CIR, 302 SCRA 241 D. Tax/Revenue Ordinances - Tuazon v. CA, 212 SCRA 739 Hagonoy Market Vendor v. Municipality of Hagonoy, GR 137621, Feb. 6,2002 - Jardine Davies v. Aliposa, GR 118900, Feb. 27,2003 E. Tax Treaties - Tanada v. Angara, GR 118295, May 2,1997 F. Case Laws (SC/CA/CTA) G. Legislative Materials IV. Limitations Upon the Power of Taxation INHERENT LIMITATIONS A. Public Purposes - Lutz v Araneta, 98 Phil. 48 - Pascual v Sec. of Public Works, 110 Phil. 331 B. Delegation of Taxation Power - Sec 5, Art. X, 1987 Constitution - Sec. 28(2), Art. VI, 1987 Constitution - Sec. 401, Tariff and Customs Code - Phil Comm. Satellite Corp. v Alcuaz, 180 SCRA 218 - Meralco v. Prov. of Laguna, 306 SCRA 750 - Pepsi-Cola Co. v City of Butuan, 24 SCRA 789 - Smith Bell & Co. v CIR, L-28271, July 25,1975 - LTO v. City of Butuan, supra - City Government of Quezon City v. Bayantel, GR 162015,

Mar. 6,2006 - Garcia v. Executive Secretary, 210 SCRA 219 - Osmena v. Orbos, 220 SCRA 703 - CIR v. CA, GR 119761, Aug. 29,1996 C Exemption of Government Agencies - Sees. 27(C) and 30(1), NIRC - Executive Order 93 - PD1931 - Maceda v. Macaraig, supra - Mactan Cebu Airport v. Marcos, GR 120082, Sept. 11,1996 - BIR Ruling No. 013-2004, Sept. 13,2004 D. Territoriality or Situs of Taxation - Manila Gas v. Collector, 62 Phil 895 - Vegetable Oil Corp. v Trinidad, 45 Phil. 822 - Wells Fargo Bank v Col, 70 Phil. 325 - Iloilo Bottlers v. Iloilo City, 164 SCRA 607 - CIR v.BOAC, 149 SCRA 395 - Hopewell Power v. Commissioner, CTA Case 5310, Nov. 18,1998 - Smith v. Commissioner, CTA Case 6268, Sept. 12,2002 - Collector v. Lara, 102 Phil 813 E. International Comity - Sec. 2, Art. 11,1987 Constitution - Tanada v. Angara, GR 118295, May 2,1997 - Mitsubishi Corp. v. CIR, CTA Case 6139, Dec. 17,2003 E. Double Taxation - Procter & Gamble Co. v Mun of Jagna, 94 SCRA 894 - Sanchez v CIR, 97 Phil. 687 - Punzalan v Mun Board of Manila, 95 Phil. 46 - CIRv.SC Johnson & Sons, Inc., 309 SCRA 87 July 2,2011 Session CONSTITUTIONAL LIMITATIONS A Due Process Cause - Sec. 1, Art. Ill, 1987 Constitution - Com. of Customs v CTA & Campos Rueda Co., 152 SCRA 641 - Phil Bank of Comm v. CIR, 302 SCRA 241 - Sison v Ancheta, 130 SCRA 654 B. Equal Protection Clause - Sec. 1, Art. Ill, 1987 Constitution - Ormoc Sugar Co. v. Treasurer of Ormoc City, 22 SCRA 603 - Villegas v. Hsui Chiong Tsai Pao, 86 SCRA 270 - Shell Co. v Vano, 94 Phil. 388 - Tiu v. CA, 301 SCRA 279 - Tan v. Del Rosario, 237 SCRA 324 - Phil. Rural Electric v. Secretary, GR 143706, June 10,2003 C. Rule of Taxation shall be Uniform and Equitable - Sec. 28(1), Art. VI, 1987 Constitution - Pepsi-Cola v Butuan City, 24 SCRA 789 - Manila Race Horse v dela Fuente, 88 Phil. 60 - Sison v. Ancheta, 130 SCRA 654 - Tolentino v. Sec of Finance, 249 SCRA 628

D. Non- Impairment of Contracts - Sec. 10, Art. Ill & Sec. 11, Art XII, 1987 Constitution - CIR v Lingayen Gulf Electric Co., 164 SCRA 67 - Misamis Oriental v CEPALCO, 181 SCRA 38 - Phil. Rural Electric v. Secretary, supra E. Non- Imprisonment for Non-payment of Poll Tax - Sec. 20, Art. Ill, 1987 Constitution F. Prohibition against Taxation of Religious and Charitable Institutions - Sec. 28(3), Art. VI, 1987 Constitution - Lladoc v CIR, 14 SCRA 292 - Province of Abra v Hernando, 107 SCRA 1021 - Abra Valley College v.Aquino, 162 SCRA 106 G. Prohibition against Taxation of Non-stock Non-prot Educational Institutions - Sec. 4(3), Art. XIV, 1987 Constitution - Sec. 28(3), Art. VI, 1987 Constitution - Sees. 27(B) and 30(H), NIRC - DOF Order 137-87 - DOF Order 149-95 - BIR Revenue Memorandum Circular 76-2003 - BIR Revenue Memorandum Circular (RMQ No. 45-95 - BIR Revenue Regulations No. 13-98 - CIR v. CA & YMCA, 298 SCRA 83 H. Freedom of Religious Worship - Sec. 5, Art. Ill, 1987 Constitution - American Bible Society v Manila, 101 Phil. 386 I. Passage of Tax Bills/ Granting of Tax Exemption - Sec. 24, Art. VI, 1987 Constitution - Sec. 28(4), Art. VI, 1987 Constitution - Tolentino v Secretary of Finance, 249 SCRA 628 J. Veto Power of the President - Sec. 27(2), Art. VI, 1987 Constitution K. Non-impairment of SC Jurisdiction - Sec. 5(2)(b), Art. VIH, 1987 Constitution V. Construction of Tax Laws A. General Rules of Construction of Tax Laws - Stevedoring v Trinidad, 43 Phil. 803 - Lorenzo v. Posada, 64 Phil 353 - Umali v. Estanislao, 209 SCRA 446 - CIR v. Solidbank, GR 148191, Nov. 25,2003 - Collector v. La Tondena, 5 SCRA 665 B. Mandatory vs. Directory Provisions - Seraca v Treasurer of Ormoc City, 27 SCRA 110 - Roxas v. Rafferty, 37 Phil 958 - Pecsonv.CA, 222 SCRA 580 C. Application of Tax Laws - Art. 2, Civil Code - CIR v. CA, GR 119761, Aug. 29,1996 - CIR v. Telefunken, 249 SCRA 401 - OR v. Michel Lhuillier, GR 150947, July 25,2003 - CIR v. Benguet Corp., GR 134587, July 8,2005

VI. EXEMPTIONS FROM TAXATION

A. In General - Greeneld v. Meer, 77 Phil 394 - Basco v. PAGCOR, 196 SCRA 52 - CIR v Botelho Shipping Corp., 20 SCRA 487 - CIR v CTA, GCL Retirement Plan, 207 SCRA 487 - CIR v Guerrero, 21 SCRA 180 - Phil. Acetylene v CIR, 20 SCRA 1056 - Maceda v Macaraig, Jr., 197 SCRA 771 - Sea-Land Service v CA, 357 SCRA 441 - Davao Gulf v. CIR, GR 117359, July 23,1998 - PLDT v. Davao City, GR 143867, Aug. 22,2001 B. Compared with Other Terms Tax Remission/Condonation - Surigao Con. Min. v. Collector, 9 SCRA 728 Tax Amnesty -PD370 - EO 399 (as amended by EO 422); BIR Revenue Regulations Nos. 6-2005 and 10-2005 - OR v. CA, 240 SCRA 368 - OR v. Marubeni, GR 137377, Dec. 18,2001 Exclusion/ Deduction -Sec. 32(B), NIRC -Sec. 34, NIRC B. Construction of Tax Exemptions - E. Rodriguez, Inc. v Collector, 28 SCRA 119 - Republic Flour Mills v CIR, 31 SCRA 148 - Wonder Mechanical Engineering v CTA, 64 SCRA 555 - Luzon Stevedoring Corp. v CTA, 163 SCRA 647 - Floro Cement v Hen. Gorospe ,200 SCRA 480 - CIR v Ledesma, 31 SCRA 95 - Resins, Inc. v Auditor Gen. 25, SCRA 754CI - CIR v CA & YMCA, 298 SCRA 83 - CIR v. CA, GR 124043, Oct. 14,1998 - Misamis Oriental Asso. V. DOF, 238 SCRA 63 - Nestle Phils, v. CA, GR 134114, July 6,2001 - Coconut Oil Reners v. Torres, GR 132527, July 29,2005 - Maceda v. Macaraig, 196 SCRA 771 - Maceda v. Macaraig, 223 SCRA 217

July 9,2011 Session PARTB: INCOME TAXATION

I. OVERVIEW AND GENERAL PRINCIPLES

A. Income - Sec. 36, Revenue Regulations No. 2 - Conwiv.CTA,213SCRA83 - CIR v.BOAC, 149 SCRA 395

- Madrigal v. Rafferty, 38 Phil 414 - International Freighting v. CIR, 1354 F 2d 310 - Anderson v. Posadas, 66 Phil 205 B. Income Tax C. When is Income Taxable? - Sees. 43-44, NIRC - Sees. 51-53, Revenue Regulations No. 2 - Umpanv.CIR,17SCRA703 - Republic v.Dela Rama, 18 SCRA 861 - Eisner v. Macomber, 252 US 89 - Raytheon Production v. CIR, 144 F2d 110 - BIR Ruling 91-99, July 8,1999 - CIR v. Tours Specialist, 183 SCRA 402 - CIR v. Javier, 199 SCRA 824 - BIR Ruling Nos. 123-97, Nov. 10,1997 and 029-98, Mar. 19,1998 D. Capital Gain; Ordinary Gain; Presumed Gain - Capital Gain - Ordinary Gain - Business Income - Income from Trade/Practice of Profession - Passive Income - Other Forms - Presumed Gain - Sec. 24(D), NIRC E. Income Tax Systems - Global Tax System - Schedular Tax System - Sison v. Ancheta, GR L-59431. July 25,1984 - Semi-schedular or Semi-global Tax System F. Criteria in Imposing Philippine Income Tax - Nationality/Citizenship - Residence - Source - Sec. 23, NIRC G. Tax Treaties
II. TAXPAYERS

A. General Principles - Sec. 23, NIRC B. Individuals - Sec. 23(A-D), NIRC Resident Citizens - Sec. 23(E), NIRC Non-Resident Citizens - Sees. 22(E), 23(B), NIRC Overseas Filipino Workers - Sec. 23(C), NIRC Resident Alien -Sees. 22(F), 24(B), NIRC - Sec. 5, Revenue Regulations No. 2 Non-Resident Alien Engaged in Trade or Business
- Sees. 22(G), 25(A), NIRC

Non-Resident Alien Not Engaged in Trade or Business - Sees. 25(B), NIRC Special Aliens - Sees. 25(C-E), NIRC C Corporations -Sec. 22(B), NIRC - CIR v. Batangas Tayabas Bus Co., 102 Phil 822 - BIR Ruling No. 317-92, Oct. 28,1992 Large Taxpayers - Revenue Regulations No. 1-98 Partnership; Co-ownership; GPP - Sees. 22(B), 26,73p), NIRC - Art. 484, Civil Code - BIR Ruling 254-91, Nov. 26,1991 - Revenue Regulations No. 1-89 - Onav.CIR,45SCRA78 - Obilles v. CIR, L-681185, Oct. 20,1985 - Reyes v. Commissioner, 24 SCRA 198 - Gatchalian v. Collector, 67 Phil 666 - Evangelista v. Collector, 102 Phil 140 - Collector v. Batangas Transport, 102 Phil 822 - Tan v. CIR, GR L-109289, Oct. 3,1994 - Pascual v. CIR, 166 SCRA 560 - Asco v. CIR, 302 SCRA 1 - Solidbank v. CIR, CTA Case No. 4868, June 19,1997 - BIR Ruling 294-88, July 5,1988 Joint Venture; Exempt v. Taxable - BIR Ruling 254-91 Domestic Corporations -Sec. 22(C), 27, NIRC - Revenue Memorandum Circular 16-2006 Resident Foreign Corporations - Branch v. Subsidiary - Winship v. Philippine Trust Co., 90 Phil 744 - Marubeni v. CIR, 177 SCRA 500 Non-Resident Foreign Corporations - Sees. 22(D), 28, NIRC - CIR v. BOAC149 SCRA 395 - Marubeni v. CIR, 177 SCRA 500 - CIR v. Procter and Gamble, 204 SCRA 277 D. Estates and Trusts -Sees. 22Q). 60-64, NIRC - Sees. 207-213, Revenue Regulations No. 2 - CIR v. Visayas Electric, 23 SCRA 715 - CIR v. CA, 207 SCRA 487 E. Registration of Taxpayers - Sees. 236(A, J), NIRC - Revenue Memorandum Circular 63-91 - DOF-BLGF Memorandum Circular 009-02

July 16 & 23,2011 Sessions (Note: UPCAT is scheduled on August 6,2011]

IIL Exempt Taxpayers A. Exempt Individuals Minimum Wage Earners - RA9504 Senior Citizens -Sec. 4. RA 9257 Revenue Regulations No. 4-2006 Under Tax Treaty - Reagan v. CIR, 30 SCRA 968 - CIR v. Robertson, 143 SCRA 796 B. Exempt Corporations - Sees. 27(C), 30, NIRC - Omnibus Investments Code; RA 7916; RA 8502; RA 6983 - Revenue Regulation No. 20-2001; Revenue Memorandum Circular No. 33-2004, May 27,2004 - Collector v. Sinco, 100 Phil 127 - Jesus Sacred Heart College v. Collector, 100 Phil 127 - CIR v. CA, GR 124043, Oct. 14,1998 - CIR v. CA, GR 115349, Apr. 18,1997 - Xavier School v. CIR, CTA Case 1682, Oct. 8,1969 IV.Gross Income and Exclusions A. Income from Whatever Source - Sees. 31-32, NIRC - Sec. 61, Revenue Regulations No. 2 - Gutierrez v. Collector, 101 Phil 713 - CIR v. BO AC, supra - Eisner v. Macomber, 252 US 189 - Helvering v. Bruun, 309 US 461 - CIR v. Javier, 199 SCRA 824 Situs of Income - Sec. 42, NIRC - Sees. 152-165, Revenue Regulations No. 2 From Sources Within the Philippines - Sec. 42 (A,B), NIRC - Revenue Audit Memorandum Order Nos. 1-86,4-86 and 1-95 - Revenue Regulations No. 16-86 - CIR v. Japan Airlines, 202 SCRA 450 - CIR v. BOAC, 149 SCRA 395 - NDC v. CIR, 151 SCRA 472 - Air Canada v. CIR, CTA EB No. 86. Aug. 26,2005 - CIR v. CTA, 127 SCRA 9 - CIR v. Marubeni, GR 137377, Dec. 18,2001 - Alexander Howden v. Collector, GR L-19392, Apr. 14,1965 - Manila Electric v. Yatao, 69 Phil 89 - Phil. Guaranty v. CIR, GR L-22074, Apr. 30,1965 From Sources Without the Philippines - Sec. 42(C), NIRC Partly Within/Without the Philippines

1 0 - Sec. 42(E), NIRC B. Compensation Income - Sec. 32(A), NIRC - Sec. 2.78.1(A), Revenue Regulations No. 2-98 - Revenue Regulations No. 3-98 - RAMOl-87 - Sec. 7, Revenue Regulations No. 1-82 - Henderson v. Collector, 1 SCRA 649; Convenience of the Employer Rule - CIR v. Castaneda, 203 SCRA 72 - Polo v. CIR, GR L-78780, July 23,1987 - Endencia v. David, 93 Phil 696 Fringe Benets - Revenue Regulations Nos. 3-98,8-2000,10-2000, and RR 005-08 Exclusions: Compensation for Injuries or Sickness - Sec. 32(b)(4), NIRC 13* Month Pay and Other benets -Sec.32(7)(b,e),NIRC - RA 7833 and its IRR (see RA 8424, Sec. 32(B)(7)(e) - Revenue Regulations No. 2-95 - Sec. 2.78.1, Revenue Regulations No. 2-98, as amended by RR 8-00,10-2000, and RR 005-08 - Revenue Regulations No. 8-00 - Revenue Memorandum Circular No. 36-94 (see RA 8424) - BIR Ruling 219-93, May 17,1993 - CIR v. Castaneda, 203 SCRA 72 Income Exempt Under Treaty -Sec. 28(b)(4), NIRC - Reagan v. CIR, 30 SCRA 968 - BIR Ruling 031-91, February 1991 - BIR Ruling 042-91, March 13,1991 C. Pensions/Retirement Benets/Separation Pay - Sec. 32(A)(10), NIRC Exclusions: - Sec. 32(6)(a-f), NIRC - Sec. 2.78.1 (B)(l-12), Revenue Regulations No. 2-98 - RA 4917; RA 7641 - CIR v. CA, 203 SCRA 72 - CIR v. GCI Retirement, 207 SCRA 487 - In re Zialcita, AM No. 90-6-015-SC, Oct. 18,1990 D. Passive Income 1. Interest Income -Sec. 32(A)(4), NIRC - Revenue Regulations No. 10-98 - Revenue Memorandum Order 63-99 (see BIR Ruling DA 701-07, Dec.
28,2007)

Exclusions: -Sec. 32(B)(7)(a), NIRC - CIR v. Mitsubishi Metal, 181 SCRA 214 - NDC v. CIR, GR L-53961, June 30,1987 Rentals/Leases - Sec. 32(A5), NIRC - Sees. 74,49 and 58, Revenue Regulations No. 2

11

- Revenue Regulations 19-86 - Limpan v. CIR, 17 SCRA 70 3. Royalties - Sec. 32(A)(6), NIRC -ClRv.SC Johnson, GR 127105, June 25,1999 - Philippine American Life v. OR, GR SP No. 31283, Apr. 25,1995 4. Dividends - Sec. 32(A)(70, NIRC - Sees. 58 and 71,250-253, Revenue Regulations No. 2 - Revenue Memorandum No. 31-90 - Sec. 73(C,D), NIRC - Republic v. Dela Rama, 18 SCRA 861 - CIR v. Manning, 66 SCRA 14 - Fisher v. Trinidad, 43 Phil 973 - CM Hoskins v. CIR, 30 SCRA 434 - Kuenzle v. CIR, 28 SCRA 365 - Wise & Co. v. Meer, GR L-48231, June 30,1947 - OR v. CA, GR 108576, Jan. 20,1999 - Yuchengco v. CIR, CTA Case No. 3429, Jan. 6,1988 - Philippine Telephone v. Collector, 58 Phil 639 - BIR Ruling No. 322-87, Oct. 19,1987 (see RR 6-2008, Sec. 8 & 9) Exclusions: - Income Exempt Under Tax Treaty - Passive Income of Foreign Government 5. Annuities and Insurance Proceeds -Sec. 32(A)(8), NIRC - Sec. 48, Revenue Regulations No. 2 Exclusions: Proceeds from Life Insurance - Sec. 32(B)(1), NIRC - Sec. 62, Revenue Regulations No. 2 - El Oriente Fabrica v. Posadas, 56 Phil 147 Return of Premium Paid - Sec. 32(B)(2), NIRC - Sec. 48, Revenue Regulations No. 2 Compensation for Injuries or Sickness - Sec. 32(B)(4), NIRC - Sec. 63, Revenue Regulations No. 2 6. Prizes and Winnings/Awards/Rewards - Sec. 32(A)(9), NIRC - Sec. 282, NIRC - Revenue Memorandum Order No. 12-93 - BIR Ruling DA-013-04 - CIR v. COA, GR 101976, Jan. 29,1993 Exclusions: PCSO and Lotto Winnings - Sec. 24(B)(1), NIRC Sports Competition Prizes -Sec. 32(B)(7)(d), NIRC 7. Other Types of Passive Income - Found Treasure - Tax Refund; Revenue Memorandum Circular 13-80

r~

1 2

- Recovery of Bad Debt Previously Deducted; Sec. 50, Revenue Regulations No. 2 - Damages - Ramnani v. CIR, CTA Case No. 5108, Sept. 13,1996 E. Gains Derived from Dealings in Property - Sees. 32(A)(3), 39-40, NIRC - Revenue Regulations No. 14-80 - Revenue Regulations No. 2-82 (Note: For shares held as capital assets, rules consolidated under RR 6-2008, April 22,2008) - Revenue Regulations No. 7-2003 Exclusions: Shares of Stocks Classied as Capital Asset and Traded in PSE - Sec. 127, NIRC F. Business Income/ Income from Exercise of Profession - Sees. 32(A)(2), 27(E), NIRC - Sees. 36-38, 43-47, Revenue Regulations No. 2 Exclusions: - Income Exempt Under a Treaty - Income Derived by Governmental/Political Subdivision from Exercise of Essential Government Function G. Partner's Distributive Share of the Gross Income of General Professional Partnerships - Sec. 32(A)(11), NIRC H. Exclusions under Special Laws - RA 9040 July 30,2011 Session V. Deductions and Exemptions A. Deductions in General -Sec. 34, NIRC - Sees. 119-120, Revenue Regulations No. 2 - Revenue Memorandum Order 38-83 - Zamora v. Collector, 8 SCRA 163 - Esso Standard v. CIR, 176 SCRA 149 - QR v. General Foods, GR 143672, April 24,2003 - CM Hoskins v. QR, 30 SCRA 434 - Gancayco v. Collector, 1 SCRA 980 - Western Minolco v. CIR, 124 SCRA 121 - Commissioner v. Philippine Acetylene, 39 SCRA 70 - QR v. Arnoldus Carpentry, GR L-71122, Mar. 25,1988 - BPI v.Trinidad, 45 Phil 384 - BIR Ruling No. 12-2004, Sept. 13,2004 Kinds of Deductions - Itemized Optional Standard - Special Deductions Limitations and Substantiation - Sec. 34, NIRC Allocation - Sec. 50, NIRC

1 3

- Yutivo Sons v. CIR, 1 SCRA 160 Allowable Deductions - Sees. 24(A), 25(A), 26,27(A,B,C), 28(A)(1), NIRC Ordinary/Necessary Business Expenses - Revenue Regulations Nos. 6-82,12-86,19-86,3-98 and 10-02 (see RA 9504 and Revenue Regulations 10-08, July 8,2008) - Atlas Consolidated v. CIR, 102 SCRA 246 - Visayan Cebu Terminal v. Collector, 108 Phil 320 - Kuenzle v. CIR, GR L-12010, Oct. 20,1959 - Alhambra Cigar v. Collector, GR L-12026, May 29,2009 - Aguinaldo Industries v. Collector, 112 SCRA 136 - Goodrich v. Collector, CTA Case No. 468, June 8,1965 - Jamir v. Collector, 4 SCRA 718 - Hospital de San Juan De Dios v. CIR, 185 SCRA 273 - Felix Montenegro v. QR, CTA Case No. 695, Apr. 30,1969 - Collector v. Philippine Education Co., 99 Phil 319 - Sec. 34(2), NIRC - Sees. 67-70,74-75, Revenue Regulations No. 2 Interest Expense - Sec. 34(B), NIRC - Revenue Regulations No. 13-00 - CIR v. Palanca, 18 SCRA 496 - CIR v. Vda. de Prieto, 109 Phil 592 - Paper Industries v. CA, 250 SCRA 434 - CIR v. Itogon-Suyoc Mines, GR L-25399, July 29,1969 - Castro v. Collector, 6 SCRA 886 - Collector v. Fisher, 1 SCRA 93 Taxes - Sees. 34(3,4), NIRC; Tax Benet Rule - Sees. 80-83, Revenue Regulations No. 2 - CIR v. Lednicky, GR L-18169, July 31,1964 - Gutierrez v. Collector, 14 SCRA 33 Losses -Sec.34(D), NIRC - Revenue Regulations No. 14-01 - Sees. 93-101, Revenue Regulations No. 2 - Revenue Regulations No. 12-77 - BIR Rulings No. 144-85, Aug. 26,1985 - Revenue Memorandum Circular 26-85 - Fernandez Hermanos v. CIR, 29 SCRA 552 - Plaridel Security v. CIR, 21 SCRA 1187 - China Bank v. CA, 336 SCRA 178 - The City Lumber v. Domingo, GR L-18611, Jan. 30,1964 - Marcelo Steel v. Collector, 109 Phil 921 - Phil. Sugar Estate v. Collector, 60 Phil 565 Bad Debts - Sec. 30(b), NIRC - Revenue Regulations Nos. 5-99 and 25-02; Tax Benet Rule - Sees. 102-104, Revenue Regulations No. 2 - Phil. Rening v. CA, 256 SCRA 667 - Collector v. Goodrich, 21 SCRA 1336 Depreciation - Sec. 34(F), NIRC

1 4 - Sees. 105-115, Revenue Regulations No. 2 - Revenue Regulations 19-86 - Basilan Estates v. CIR, 21 SCRA 17 - Zamora v. Collector, 8 SCRA 163 Depletion - Sec. 34(G), NIRC - Revenue Regulations No. 5-76 - Consolidated Mines v. CTA, 58 SCRA 618 R&D Expenses - Sec. 34(1), NIRC Charitable and Other Contributions - Sec. 34(H), NIRC - Revenue Regulations No. 13-98 - BIR-NEDA Regulations Nos. 1-81 and 1-82 - Roxas v. CTA, 23 SCRA 276 Contribution to a Pension Trust - Sec. 340), NIRC - Sec. 118, Revenue Regulations No. 2 C. Non-Deductible Expenses - Sec. 26, NIRC - Sees. 119-122, Revenue Regulations No. 2 - Collector v.Jamir, 4 SCRA 716 - Adas Consolidated v. CIR, GR L-26911, Jan. 27,1981 - Gancayco v. Collector, 1 SCRA 980 Losses between Related Taxpayers - Sec. 36(B), NIRC Losses on Wash Sales - Sec. 38, NIRC Illegal Expenses - Sec. 34(1), NIRC - Callanocv. Collector, 3 SCRA 517 - 3M Philippines v. CIR, GR 82833, Sept. 26,1988 D. Special Deductions - Sec. 37, NIRC E. Deductions for Individuals Optional Standard Deductions - Sec. 340-), NIRC Premium Payments - Sec. 34(M), NIRC F. Personal Exemptions - Sec. 35, NIRC - RA9504 - Collector v. Calsado, GR L-10293, Feb. 27,1959 - Resaba v. Republic, GR L-6294, June 28,1954 Basic Personal Exemption - Sec. 2.79(I)(l)(a), Revenue Regulations No. 2-98 OMote: amended by RA 9504 and RR 10-08) - Revenue Regulations Nos. 1-79 and 9-99 Additional Exemption for Dependents - Sec. 2.79(l)(l)(b), Revenue Regulations No. 2-98 Reciprocity

1 5

MID-TERM EXAMINA TION - AUGUST 13,2010 August 6 & 20,2011 Sessions vltaxon Individuals: Bases and Rates A. Resident Gtizens and Resident Aliens Taxable Income - Sec. 24(A)(l)(a-c), NIRC Passive Income: InteOrest, Royalties, Prizes and Other Winnings - Sees. 24(B)(1), 24(FF), NIRC - Revenue Regulations No. 10-98 Dividends - Sec. 24(B)(2), NIRC Capital Gains on Shares of Stocks -Sec. 24(C), NIRC Capital Gains on Real Property -Sec. 24(D), NIRC - Revenue Regulations Nos. 8-98,13-99, as amended by 14-2000 and 6-01 B. Non-Resident Aliens Engaged in Trade or Business Taxable Income -Sec. 25(A)(1), NIRC Passive Income -Sec. 25(A)(2), NIRC Capital Gains
- Sec. 25(3)

C. Non-Resident Aliens Not Engaged in Trade or Business -Sec. 25(B) D. Special Aliens - Sec. 25(C-E), NIRC E. Members of GPP - Sec. 26, NIRC VII. Tax on Corporations: Bases and Rates A. Domestic Corporations Taxable Income - Sec. 27(A), NIRC Passive Income: Interest, Royalties -Sec.27(D)(l,3),NIRC Dividends - Sec. 27(4), NIRC Capital Gains - Sec. 27(D)(2,5), NIRC B. Resident Foreign Corporations Taxable Income -Sec. 28(A), NIRC - NV Reederit v. CIR, 162 SCRA 487

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Branch Prot Remittance Tax - Sec. 28(A)(5), NIRC - Revenue Memorandum Circular 55-80 - Bank of America v. CIR, GR 10392, July 21,1994,234 SCRA 302 - Marubeni v. CIR, 177 SCRA 500 - Campania General de Tabacos, CTA 4451, Aug 23,1993 Passive Income: Interest - Sec. 28(A)(7)(a-b), NIRC Dividends - Sec. 28(A)(7)(d), NIRC Capital Gains -Sec. 28(A)(7)(c), NIRC C. Non-resident Foreign Corporations Taxable Income - Sec. 28(B)(1) Passive Income: Interest - Sec. 28(B)(5)(a), NIRC Dividends -Sec. 28(B)(5)(b), NIRC - CIR v. Procter and Gamble, 160 SCRA 650; 204 SCRA 377 - CIR v. Wander Philippines, 160 SCRA 573 - Marubeni v. Commissioner, 177 SCRA 500 Capital Gains -Sec.28(B)(5)(c), NIRC D. Special Corporations - Sec. 27(B-C), NIRC Private Educational Institutions and Non-prot Hospitals - Sec. 4(3), Art. XIV, 1987 Constitution -DOF Order No. 137-87 Non-prot-non-stock Educational Institution - DOF Order No. 149-95, November 24,1995 Non-resident Cinematographic Film Owner, Lessor or Distributor International Carriers - Sec. 28(3), NIRC - BOAC v. CIR, GR L-65773-4, April 30,1987 - Revenue Regulations No. 15-2002 Non-resident Owner of Vessels Non-resident Lessor of Aircraft, Machineries and Other Equipment Foreign Currency Deposit Units/Offshore Banking Units - Sec. 28(4), NIRC - RA9294 - Revenue Regulations Nos. 10-76,14-77 (note: see RA 8424) and 10-98 Regional or Area Headquarters and Regional Operating Headquarters - Sees. 22(D-E), 28(A)(6), NIRC Petroleum Service Contractor and Subcontractor - PD1354 - PD87 - Zapata Marine Services v. CTA, GR 80046, Apr. 18,1988 BCD A, PEZA and BOI Registered Enterprises - Revenue Regulations No. 20-2002 - Omnibus Investments Code

1 7 E. Minimum Corporate Income Tax - Sees. 27(E), 28(A)(2), NIRC - Revenue Regulations Nos. 9-98, as amended by 12-2007 - Revenue Memorandum Circular 4-2003 F. Improperly Accumulated Earnings Tax - Sec. 29, NIRC - Revenue Regulations No. 2-01 - Cyanamid Phils, v. CA, GR 1008067, Jan. 20,2000 - CIR v. Antonio Tuason, GR 85749, May 15,1989 - Manila Wine Merchants v. CIR, GR L-26145, Feb. 25,1984 G. Fringe Benets Tax; De Minimis Benets; ACA; RATA; PERA - Sec. 33, NIRC - Revenue Regulations No. 3-98, as amended by 8-2000,10-2000, and 005-08 August 27 & September 3,2011 Sessions VUL Ordinary Assets and Capital assets A. Capital Asset v. Ordinary Asset -Sees. 24(D), 39, NIRC - Sees. 132-135, Revenue Regulations No. 2 - Revenue Regulations No. 7-2003 - Tuazon vs. Lingad, 58 SCRA 170 - Calasanz vs. CIR, G.R. No. L-26284, Oct. 9,1986 - Ferrer vs. Collector, 5 SCRA 1022 - Roxas vs. CIR, G.R. No. L-25043, Apr. 26,1968 B. Treatment of Sale or Exchange of Ordinary Assets C. Treatment of Sale or Exchange of Capital Assets which are not Real Property - Sees. 39(A), 40, NIRC - Calasanz vs. CIR, 144 SCRA 664 Net Capital Gain and Net Capital Loss Holding Period D. Treatment of Sale or Exchange of Capital Assets which are Real Property Capital Tax on Presumed Gain - Sees. 6(E), 24(A), 24(D)(1), NIRC E. Foreclosure Sales of Real Property - Revenue Memorandum Order Nos. 29-86,16-88,27-89 and 6-92 - Revenue Regulations No. 4-99 Redemption period DC. Tax-Free Exchanges and Other Tax-Exempt Transactions A. In General - W.C. Ogan and Bohol Land Transportation Co., G.R. No. 49102, May 30, 1949 - Revenue Regulations No. 18-2001, Nov. 13,2001 - Revenue Memorandum Order 32-2001, Nov. 28,2001 B. Merger or Consolidation - Sec. 40(C)(2) and (6)(b), NIRC - CIR vs. Runo, 148 SCRA 42 - BIR Ruling No. 383-87, Nov. 25,1987 De Facto Merger

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1 8 - Revenue Memorandum Ruling 1-2002, Apr. 25,2002 C. Exchange of Property for Shares of Stock -Sec. 40(C)(2), NIRC - Liddell & Co., Inc. vs. Collector, 2 SCRA 632 - Revenue Memorandum Ruling No. 1-2001, Nov. 29,2001 D. Other Tax-Exempt Transactions Sale of Principal Residence - Sec. 24(D)(2), NIRC - Revenue Regulations Nos. 13-99 and 14-2000 Community Mortgage Program Socialized Housing - Sees. 19,20,32, RA 7279 - Sees. 93,188, NIRC Deeds of Trusts Transfers by Mistakes - Sec. 196, NIRC Transfers of Rights Rescinded Contracts Equitable Mortgage Condominium Corporations Miscellaneous Exempt Transactions - Sec. 24(D), NIRC - RA6657 E. Administrative Requirements - Revenue Memorandum Order No. 32-2001, Nov. 29,2001. September 10 & 27,2011 Sessions X. Accounting Periods and Methods Calendar Year v. Fiscal Year - Sees. 22,43-47, NIRC - Sees. 51-53,166-172, Revenue Regulations No. 2 Recognition of Income Long Term Contracts - Sec. 48, NIRC Installment Sales - Sees. 49-50, NIRC Termination of Leasehold - Sec. 49, NIRC - Consolidated Mines v. CTA, GR L-18844, Aug. 29,1974 - Perez v. CTA, GR L-10507, May 30,1958 - Collector v. Reyes, GR L-11534, Nov. 25,1958 - Filipinas Synthetic v.CA, 316 SCRA 480 Recording of Income and Expenses/ Keeping of Books - Sees. 175-179, Revenue Regulations No. 2 - CLR v. Wyeth Suaco, 202 SCRA 135 - Consolidated Mines v. CTA, 58 SCRA 618 XI. Withholding of Taxes -Sees. 57-59, NIRC - RA 9504

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1 9 - Revenue Regulations Nos. 2-98,12-98,6-01,12-01,14-02,17-03,30-03,1-2004, 3-2004 and 1-2006 - Revenue Memorandum Circular Nos. 46-2002 and 72-2004 - OR v. Procter and Gamble, GR 66838, Dec. 2,1991 - CIR v. Wander Philippines, GR L-68375, Apr. 15,1988 - Filsyn v. CA, GR 118498, Oct. 12,1999 - CIR v. Procter and Gamble, 160 SCRA 560 - QR v. Procter and Gamble, 204 SCRA 377 - Marubeni v. QR, 177 SCRA 501 - QR v. CA, GR 127105, June 25,1999 and Aug. 30,1999 - Republic v. Lim Tian, 16 SCRA 584 September 24,2011 Session XII. Returns and Payment of Taxes A. In General - Revenue Regulations Nos. 7-93,14-93,3-02 and 16-02 - Garrison v. CA, 187 SCRA 525 B. Individuals - Sees. 51,55-56, NIRC C. Corporations - Sees. 52-54,75-77,47, NIRC - Sec. 244, Revenue Regulations No. 2. - CIR v. TMX Sales, 205 SCRA 18 - ACCRA Investment v. CA, 204 SCRA 957 - San Carlos Milling v. CIR, 228 SCRA 135 September 24,2012 Session Integration Session Final Examination - October 15,2010

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