I.

GROSS INCOME AND EXCLUSIONS

A. Income from Whatever Source
Secs. 31-32, NIRC
Sec 61, Revenue Regulations No. 2
Gutierrez v Collector, 101 Phil 713
CIR v BOAC,
Eisner v Macomber, 252 US 189
Helvering v Bruun, 309 US 461
CIR v Javier, 199 SCRA 824
B. Compensation Income
Sec. 32(A), NIRC
Sec 2.78.1(A), Revenue Regulations No. 2-98
Revenue Regulations No. 3-98
RAMO 1-97
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
C. Inclusions
Sec. 32 (A)
1.
Compensation:Special Problems on In-Kind Compensation
Sec. 2.78.1 (A) and (1), Revenue Regulation 2-98 (April 17, 1998)
a. Limited Choice and Restricted Property
US v Drescher, 179 F.2d 863 (2nd cir. 1950)
BIR Rul. 9-04 (Sept. 13, 2004)
b. Forced Consumption: Conveniene of the Employer Rule
Sec. 2.78.1 (A)(2), Rev. Regs. 2-98 (April 17, 1998)
Sec. 2, Rev. Audit Mem. Order 1-87 (April 23, 1987)
Benaglia v CIR, 36 BTA 838 (1937)
c. De Minimis Benefits
Sec. 2.78.1 (A)(3), Rev. Regs. 2-98 (April 17, 1998)
BIR Rul. 23-02 (June 21, 2002)
d. Travel and Entertainment
Rudolph v US, 370 US 269 (1962)
2.
3.
4.
5.
6.

Business Income
Gains
Interests
Rents
Royalties

7.

Dividends
Sec. 73
Sec. 250-256, Rev. Regs. 2
Wise & Co., Inc. v Meer (June 30, 1947)
CIR v CA (Jan. 20, 1999)
CIR v Manning (Aug. 6, 1975)
BIR Rul. 39-02 (Nov. 11, 2002)

8.
9.
10.
11.

Annuities
Prizes and Winnings
Pensions
Share in GPPs income
Sec. 26

D. Exclusions
Sec. 32(B)
1.

Gifts, Bequests and Devises

Sec. 32(B)(3)
CIR v Duberstein, 363 US 278 (1960)
Hornung v CIR, supra

2.

Compensation for Injuries or Sickness

Sec. 32 (B)(4)
OGilvie v US, 519 US 79 (1996)
Murphy v US, No. 05-5139 (DC Cir. Aug. 22, 2006)
Murphy v US, No. 05-5139 (DC Cir. Jul. 3, 2007) (on rehearing)
BIR Rul. 57-83 (April 12, 1983)

3.

Retirement Benefits, Pensions, Gratuities, etc.

Sec. 32(B)(6) and (7)(e)
CIR v. CA (March 23, 1992)
CIR v. CA (Oct. 17, 1991)
In Re: Atty. Bernardo Zialcita, A.M. No. 90-6-015-SC (Oct. 18, 1990)
BIR Rul. 1-95 (Jan. 6, 1995)
Rep. Act No. 4917 (June 17, 1967)
Rep. Act No. 7833 (Dec. 8, 1994)

Rev. Regs. 2-95 (Jan. 3, 1995)

RMC 36-94 (Dec. 14, 1994)
4.

Income Derived by Foreign Government

Sec. 32(B)(7)(a)
CIR v. Mitsubishi Metal Corp. (Jan. 22, 1990)

5.

Gains from the Sale of Bonds, Debentures or Other Certificates of

Indebtedness
Sec. 32(B)(7)(g)
Nippon Life Ins. Co., Inc. v. CIR, CTA Case No. 6142 (Feb. 4, 2002)

E. DEDUCTIONS
Sec. 34
Sec. 36(A)
Secs. 119 to 120, Rev. Regs. 2
A. Expenses
Sec. 34(A)
1.

Non-Deductible Personal Expenses v. Deductible Business Expenses

Smith v. CIR, 40 B.T.A. 1038 (1939)
Pevsner v. CIR, 628 F.2d 467 (5th Cir. 1980)
Rudolph v. U.S., supra
Schultz v. CIR, 16 T.C. 401 (1951)

2.

Travel Expenses While Away from Home

CIR v. Flowers, 326 U.S. 465 (1946)
Hantzis v. CIR, 638 F.2d 248 (1st Cir. 1981)

3.

Deductible Current Expenses v. Non-Deductible Capital Expenditures

Mt. Morris Drive-In Theatre Co. v. CIR, 25 T.C. 272 (1955)
Midland Empire Packing Co. v. CIR, 14 T.C. 635 (1950)
INDOPCO, Inc. v. CIR, 503 U.S. 79 (1992)
CIR v. General Foods (Phil.), Inc. (April 24, 2003)

4.

Ordinary and Necessary

Welch v. Helvering, 290 U.S. 111 (1933)
Atlas Consolidated Mining & Devt Corp. v. CIR (Jan. 27, 1981)

5.

Reasonable Compensation
C.M. Hoskins & Co., Inc. v. CIR (Nov. 28, 1969)
Kuenzle & Streiff, Inc. v. Collector (Oct. 20, 1959)

6.

Period for Which Deductions and Credits Taken

Sec. 45
CIR v. Isabela Cultural Corp. (Feb. 12, 2007)

B. Interest
Sec. 34(B)
Paper Ind. Corp. of the Phil. v. CA (Dec. 1, 1995)
CIR v. Vda. de Prieto (Sept. 30, 1960)
Rev. Regs. 13-2000 (Nov. 20, 2000)
1.

Interest arbitrage
BIR Rul. No. 006-00 (Jan. 5, 2000)

C. Taxes
Section 34(C)
CIR v. Lednicky (July 31, 1964)
D. Losses
1.
Casualty losses
Sec. 34(D)(1), (2)
2.

NOLCO
Sec. 34(D)(3)
Paper Ind. Corp. of the Phil. v. CA, supra
Rev. Regs. 14-01 (Aug. 27, 2001)
BIR Rul. 30-00 (Aug. 10, 2000)

3.

Realized vs. unrealized losses

BIR Rul. No. 206-90 (Oct. 30, 1990)
BIR Rul. No. 144-85 (Aug. 26, 1985)

4.

Losses from sales or exchanges (to be taken-up in XV below)

E. Bad Debts
Section 34(E)
Rev. Regs. 5-99 (March 10, 1999)
Phil. Refining Co. v. CA (May 8, 1996)
Fernandez Hermanos, Inc. v. CIR (Sept. 30, 1969)
F. Depreciation
Sec. 34(F)
Basilan Estates, Inc. v. CIR (Sept. 5, 1967)
Limpan Investment Corp. v. CIR (July 26, 1966)

G. Depletion
Sec. 34(G)
Consolidated Mines, Inc. v. CTA (Aug. 29, 1974)
H. Charitable and Other Contributions
Sec. 34(H)
BIR Rul. 19-01 (May 10, 2001)
I. Research and Development
Sec. 34(I)
3M Phil., Inc. v. CIR (Sept. 26, 1988)
J. Pension Trusts
Sec. 34(J)
K. Additional Requirements for Deductibility
Section 34(K)
L. Optional Standard Deduction
Sec. 34(L), as amended by Rep. Act No. 9504
M. Premium Payments
Sec. 34(M)
II. TAXABLE INCOME
Sec. 31
III. FRINGE BENEFITS TAX (FBT)
Sec. 33
Rev. Regs. 3-98 (Jan. 1, 1998)
Rev. Regs. 8-00 (Aug. 21, 2000)
Rev. Regs. 10-00 (Dec. 14, 2000)
IV. CAPITAL GAINS AND LOSSES
A. Capital Assets
Sec. 39
Sec. 132, Rev. Regs. 2
Corn Products Refining Co. v. CIR, 350 U.S. 46 (1955)
Arkansas Best Corp. v. CIR, 485 U.S. 212 (1988)
Calasanz v. CIR (Oct. 9, 1986)
BIR Rul. 27-02 (July 15, 2002)
B. Ordinary income
Sec. 22(Z)
Tuason v. Lingad (July 31, 1974)
C. Net Capital Gain, Net Capital Loss
Jardine Davies, Inc. v. CIR, CTA Case No. 5738 (Aug. 1, 2000)
D. Percentage Taken into Account
E. Limitation on Capital Loss
China Banking Corporation vs. Court of Appeals (July 19, 2000)
V. DETERMINATION OF GAIN OR LOSS FROM SALE OR EXCHANGE OFPROPERTY
Sec. 40
Sec. 136-143, Rev. Regs. 2
A. Computation of Gain or Loss
Sec. 40(A)
Crane v. CIR, 331 U.S. 1 (1947)
B. Amount Realized
Sec. 40(A)
C. Cost or Basis for Determining Gain or Loss
Sec. 40(B)
Philadelphia Park Amusement Co. v. U.S., 126 F. Supp. 184 (1954)
D. Exchange of Property
1.
General Rule Gain Recognition
Sec. 40(C)(1)
2.
Exception Non-Recognition Transactions (Tax-Free Exchange)
a. Transfer of Property to a Controlled Corporation
Sec. 40(C)(6)(c)
Sec. 40(C)(2), last par., NIRC
Delpher Trades Corp. v. IAC (Jan. 26, 1988)
BIR Rul. No. 274-87 (Sept. 9, 1987)
RMR 01-01 (Nov. 29, 2001)
Intermountain Lumber v. CIR, 65 T.C. 1025 (1976)
b. Statutory Merger or Consolidation
Sec. 40(C)(6)(a), (b)
Sec. 40(C)(2)(a), (b), (c)
CIR v. Rufino (Feb. 27, 1987)

c. Transfer of Substantially All the Assets (De Facto Merger)

Sec. 40(C)(6)(a), (b)
Sec. 40(C)(2)(a), (b), (c)
BIR Rul. 19-97 (Feb. 27, 1997)
RMR 1-02 (April 25, 2002)
d. Exchange Not Solely in Kind (Boot)
Sec. 40(C)(3)
e. Assumption of Liability in Tax-Free Exchanges
Sec. 40(C)(4)
f. Carry-Over/Substituted Basis in Tax-Free Exchanges
Sec. 40(C)(5)
Rev. Regs. 18-01 (Nov. 13, 2001), Sec. 2 only
g. Business Purpose
Gregory v. Helvering, 293 U.S. 465 (1935)
3.

Losses from Wash Sales of Stocks or Securities

Sec. 38
Sec. 131, Rev. Regs. 2

VI. SITUS OF TAXATION

Sec. 42
A. Gross Income from Sources Within and Without the Phils.
Sec. 42(A) and (C)
1.
Interest
Sec. 42(A)(1) and (C)(1)
2.

Dividends
Sec. 42(A)(2) and (C)(2)

3.

Compensation for Personal Services

Sec. 42(A)(3) and (C)(3)
CIR v. Marubeni Corp. (Dec. 18, 2001)
CIR v. British Overseas Airways Corp. (April 30, 1987); read dissenting opinion of J. Feliciano
Howden & Co., Ltd. v. Collector (April 14, 1965)
Korfund Co., Inc. v. CIR, 1 T.C. 1180 (1943)
Stemkowski v. CIR, 690 F.2d 40 (1982)

4.

Rentals and Royalties

Sec. 42(A)(4) and (C)(4)
Rev. Rul. 68-443, 1968-2 C.B. 304
Phil. American Life Ins. Co., Inc. v. CTA, CA-GR Sp. No. 31283 (April 25, 1995)
a.

Compensation for Personal Services or Royalty?

Karrer v. U.S., 152 F. Supp. 66 (1957)
Boulez v. CIR, 83 T.C. 584 (1984)

5.

Sale or Real Property

Sec. 42(A)(5) and (C)(5)

6.

Sale of Personal Property

Sec. 42(A)(6) and (E)
a.
Sale by Producer or Manufacturer of Personal Property
b.
Purchase and Sale of Personal Property
c.
Sale of Shares of Stock in a Domestic Corporation
d.
Outright Sale or Assignment of Intangibles

RMC 44-2005 (Sept. 1, 2005)

B.
Income from Sources Partly Within or Without the Philippines
CIR v. CTA and Smith Kline & French Overseas (Jan. 17, 1984)
RAMO 1-95 (March 21, 1995)
RAMO 1-86 (April 25, 1986)
RAMO 4-86 (April 5, 1986)
Rev. Regs. 16-86 (Sept. 26, 1986)
VII. ACCOUNTING PERIODS AND METHODS
Secs. 43-50
Secs. 166-177, Rev. Regs. 2
Secs. 51-53, Rev. Regs. 2
A.

Accounting Method - cash (actual or constructive) or accrual

B.

Hybrid Method
Consolidated Mines, Inc. v. CTA (Aug. 29, 1974)

C.

Percentage of Completion Method

Sec. 48
Sec. 44, Rev. Regs. 2

D.

Change of Accounting Period

E.

Installment Basis

F.

Allocation of Income and Deductions

VIII. RETURNS AND PAYMENT OF TAXES

A.

Individual Return
Secs. 51 & 56

1.
2.
3.
4.
5.
6.
7.

Who are Required to File

Those not Required to File
Where to File
When to File
Where to Pay
Capital Gains on Shares of Stocks and Real Estate
Quarterly Declaration of Income Tax
Sec. 74

B.

Corporation Returns
Sec. 52, 53 & 56

1.

Quarterly Income Tax

Sec. 75

2.

Final Adjustment Return

Sec. 76
BPI-Family Savings Bank v. Court of Appeals (April 12, 2000)
Philam Asset Mgt., Inc. v. CIR (Dec. 14, 2005)

3.
4.

Where to File
When to File
Sec. 77

5.
6.

When to Pay
Capital Gains on Shares of Stock

7.

Return of Corporations Contemplating Dissolution/Reorganization

Sec. 52(C)
Sec. 244, Rev. Regs. 2
Bank of the Philippine Islands v. CIR, CA-GR SP No. 38304 (April 14, 2000)

8.

Returns of GPPs
Sec. 55

IX. WITHHOLDING TAX

A.

Final Withholding Tax at Source

Sec. 57(A)
CIR vs. Wander Philippines, Inc. (April 15, 1988)
CIR v. Procter & Gamble Phil. Mfg. Corp. (April 15, 1988)
Sec. 2.57(A) & 2.57.1, Rev. Regs. 2-98 (April 17, 1998)

B.

Creditable Withholding Tax

Sec. 57(B)
Filipinas Synthetic Fiber Corporation v. CA (Oct. 12, 1999)
Sec. 2.57(B) & 2.57.2, Rev. Regs. 2-98 (April 17, 1998)

C.

Return and Payment of Tax

Sec. 58

D.

Withholding on Wages
Sec. 78 83
Sec. 2.78, Rev. Regs. 2-98 (April 17, 1998)

E.

Withholding Tax by Government Agencies

Sec. 2.57.2(N), Rev. Regs. 2-98 (April 17, 1998)