TAXATION II-INCOME TAX GROSS

INCOME

STUDY GUIDE
4 HOURS

III. INCOME FROM TRADE, BUSINESS OR PRACTICE OF PROFESSION,

GAINS FROM DEALINGS IN PROPERTY, INCOME OTHER THAN THOSE
SUBJECT TO FINAL TAX, INCOME OTHER THAN COMPENSATION
INCOME & INCOME FROM WHATEVER SOURCE
A. Manner of determining income tax due and payable
1. Individual taxpayers (Secs. 31, 32, 34, 35 & 36)
a. Resident citizens, non-resident citizens, resident aliens
b. Non-resident alien engaged in trade or business in the Philippines
c. Non-resident alien not engaged in trade or business in the Philippines
2. Estates and trusts (Secs. 60, 61, 62, 63, 64)
3. Corporate taxpayers (Secs. 27 & 28)
a. Domestic and resident foreign corporations
b. Non-resident foreign corporations
B. Determination of gross income of taxpayers engaged in:
1. Trading, manufacturing and mining business
2. Farming business
a. Fernandez Hermanos v. CIR, Sept. 30, 1969
3. Practice of profession or rendering services
4. Long-term construction contracts (Sec. 48)
C. Gains from dealings in property (Secs. 39 & 40)
1. General rule as to income taxability of gain or deductibility of loss
2. Factors to be considered in determining gain or loss from dealings in property
a. Calasanz v. CIR 144 SCRA 664
3. Basis or adjusted basis of property sold or disposed
4. Ordinary gains and ordinary losses (Sec. 40)
5. Capital gains and capital losses (Sec. 39)
a. Gains and losses from short sales
6. When gains or losses not recognized for income tax purposes (Sec. 40)
7. When gains are recognized but not the losses (Sec. 40)
a. Loss on a wash sale (Sec. 38)
8. Jurisprudence
a. Tuazon v. Lingad, July 31, 1974
b. CIR v. Estate of Toda, Sept 14, 2004
c. CREBA, Inc. v. Romulo, Mar. 9, 2010
d. China Banking Corp. v. CA, July 19, 2000
e. CIR v. Rufino, Feb, 27, 1987
D. Interests
1. General rule as to income taxability
a. Beltran v. Paic Finance Corp., May 19, 1992
2. Exemptions from income tax
3. Jurisprudence
a. CIR v. Mitsubishi Metal Corp., January 22, 1990
E. Income from lease agreements
 1. General rule as to income taxability
2. Ways by which taxable rent may be paid to lessor
3. Treatment of advance rent and deposit for income tax purposes
4. Where lessee is bound to construct permanent improvement on the leased
property
F. Dividends
1. Meaning and ways by which paid to stockholders
2. Kinds and how subjected to income tax
3. Jurisprudence
a. Nielson & Co. v. Lepanto Consolidated Mining Corp. 26 SCRA 540
b. Filipinas Life Assurance Co. v. CIR, October 31, 1967
c. Marubeni Corp. v. CIR, March 7, 1998
d. CIR v. CA and A. Soriano Corp., 301 SCRA 152
G. Other kinds of income includible in gross income (Secs. 31 & 32)
1. Prizes and winnings
2. Royalties
3. Recovery of bad debts
4. Tax refunds
5. Money or property embezzled, swindled, stolen or robbed
6. Money received by mistake
7. Money gained through extortion, gambling, bribery, corruption, kidnapping and
racketeering
8. Jurisprudence
a. Gutierrez v. Collector, 101 Phil. 713
b. CIR v. Javier, 199 SCRA 824
H. References
1. Chavez, J., The Secrets of Income Taxation (A Guide to Passing the Bar), 2013
2. De Leon, H.S., and De Leon, H.M., Jr., The National Internal Revenue Code,
Vol. I, Annotated, 2015
3. De Leon H.S. & De Leon, H.M., Jr., The Law on Income Taxation, 2014
4. Domondon, A.T., Taxation Vol. II-A&B, Income Taxation, 2013
5. Mamalateo, V.. Philippine Income Tax, 2014