UNIVERSITY OF THE PHILIPPINES

College of Law
Diliman, Quezon City
________________________________________________________________________
________________
Syllabus on Income Taxation
Prof. Carlos G. Baniqued
I.

Basic Structural and Definitional Concepts

A. Meaning of Income
Sec. 32(A), NIRC
Sec. 36, Rev. Regs. No. 2
CIR v. Tours Specialist, 183 SCRA 402
Eisner v. Macomber, 252 U.S. 189 (1920)
James v. U.S., 366 U.S. 213 (1961)
B. Realization
Sec. 38, Rev. Regs. No. 2
Eisner v. Macomber, supra
C. Imputed Income
D. Recovery of Capital Investment
Sec. 40(A), NIRC
E. Windfall Receipts
Commissioner v. Glenshaw Glass, 348 U.S. 426 (1955)
F. Recovery of Deducted Items: Tax Benefit Principles
G. Indirect Payments
Old Colony Trust Co. v. CIR, 279 U.S. 716 (1929)
H. Discharge of Indebtedness Income
United States v. Kirby Lumber Co., 284 U.S. 1 (1931)
I. Income from Unlawful Activities
United States v. Sullivan, 274 U.S. 259 (1927)
CIR v. Wilcox, 327 U.S. 404 (1946)
James v. U.S., 366 U.S. 213 (1961)
J.
Amounts Received Under Claim of Right
North American Oil Consolidated v. Burnet, 286 U.S. 417
(1932)
K.
Reimbursement for Wrongful Death or Injury
L.
Fringe Benefits
Sec. 33, NIRC
Rev. Regs. No. 3-98
M.
Convenience of the Employer Test
Sec. 2.78.1(A)(2), Rev. Regs. No. 2-98 (April 17, 1998)
Sec. 2, Rev. Audit Mem. Order No. 1-87 (April 23, 1987)
Collector v. Henderson, 1 SCRA 649 (1961)
N.
De Minimis Benefits
Sec. 2.78.1(A)(3), Rev. Regs. No. 2-98 (April 17, 1998)

2
Rev. Regs. No. 5-2008, April 17, 2008
Rev. Regs. No. 5-2011, March 16, 2011
BIR Rul. No. DA (ECB-026) 778-2009, Dec. 15, 2009
II.

Definition of Gross Income

A.
Statutory Definition
Sec. 32(A), NIRC
B. Compensation for Services
Sec. 32(A)(1), NIRC
C. Income from Business or Exercise of Profession
Sec. 32(A)(2), NIRC
D. Gains from Dealings in Property
Sec. 32(A)(3), NIRC
E. Passive Income Interest, Rent, Royalty and Dividend
Sec. 32(A)(4)-(7), NIRC
Rev. Regs. No. 10-98 (Aug. 25, 1998)
F. Prizes and Winnings
Sec. 32(A)(9), NIRC
G. Pensions and Annuities
Sec. 32(A)(10), NIRC
H. Partners Distributive Share in Net Income of a GPP
Sec. 32(A)(11), NIRC

III.

Exclusions from Gross Income

A. Life Insurance Proceeds and Return of Premiums
Sec. 32(B)(1), NIRC
B.
Annuities
C. Gifts, Bequests, and Devises
Sec. 32(B)(3), NIRC
Pirovano v. CIR, 14 SCRA 832 (1965)
Commissioner v. Duberstein, 363 U.S. 278 (1960)
D. Compensation for Personal Injuries or Sickness
Sec. 32(B)(4), NIRC
E. Income Exempt Pursuant to a Treaty
Sec. 32(B)(5), NIRC
F. Retirement Benefits, Pensions, Gratuities, etc.
Sec. 32(B)(6), NIRC
BIR Rul. No. 068-14, Feb. 25, 2014
CIR v. Court of Appeals & Castaneda, 203 SCRA 72 (1991)
G. Separation Benefits
H. GSIS, SSS, etc. Benefits
I. Prizes, Awards, Scholarships and Fellowships
Sec. 32(B)(7)(c), NIRC
J. Employees 13th Month Pay, De Minimis Benefits, Fringe
Benefits, etc.
Sec. 32(B)(7)(e), NIRC

3
K. Gain from Sale of Long-Term Bonds, Debentures and other
Certificates of Indebtedness
Sec. 32(B)(7)(g), NIRC
Gain from Redemption of Shares in Mutual Fund
Sec. 32(B)(7)(h), NIRC
L. Income Derived by Foreign Governments
Sec. 32(B)(7)(a), NIRC
M. Income Derived by Philippine Government or its Political
Subdivisions
Sec. 32(B)(7)(b), NIRC
N.
Income Already Subjected to Final Tax
O.
Earnings of Overseas Filipino Workers
Sec. 23(B) and (C), NIRC
Sec. 24(A)(1)(b) NIRC
Rev. Regs. No. 1-2011, Feb. 24, 2011
IV.

Cost of Goods Sold

V.

Deductions from Gross Income

Sec. 34, NIRC
Sec. 36, NIRC
Sec. 119 to 120, Rev. Regs. No. 2
A.
Ordinary and Necessary Business Expenses
Sec. 34(A)(1), NIRC
CIR v. General Foods (Phils.), Inc., 401 SCRA 545 (2003)
CIR v. Algue, Inc., 158 SCRA 9 (1988)
Collector v. Jamir, 4 SCRA 718 (1962)
B.
Interest
Sec. 34(B), NIRC
C. Taxes
Sec. 34(C), NIRC
D. Losses
Sec. 34(D), NIRC
Rev. Regs. No. 14-2001
BIR Rul. No. 11-2002, March 27, 2002
Paper Industries Corp. of the Phils. v. CA, 250 SCRA 434
(1995)
E. Bad Debts
Sec. 34(E), NIRC
Philex Mining Corporation v. CIR, 551 SCRA 428 (2008)
F. Cost Recovery, Depreciation and Amortization
Sec. 34(F), NIRC
G. Depletion
Sec. 34(G), NIRC
H. Charitable and Other Contributions
Sec. 34(H), NIRC

I.
J.
K.
L.

M.

N.
VI.

Rev. Regs. No. 13-98

Research and Development Expenditures
Sec. 34(I), NIRC
Contributions to Employees Pension Trusts
Sec. 34(J), NIRC
Premium Payments on Health and/or Hospitalization
Insurance
Sec. 34(M), NIRC
Substantiation of Deductions
Sec. 34(A)(1)(b), NIRC
Rev. Regs. No. 12-2013, July 12, 2013 (effect of failure to
withhold)
Optional Standard Deduction
Sec. 34(L), NIRC
Rev. Regs. No. 16-2008, Nov. 26, 2008
Rev. Regs. No. 2-2010, Feb. 18, 2010
Rev. Mem. Circular No. 16-2010, Feb. 26, 2010
Personal Exemptions for Individuals
Sec. 35, NIRC

Recognition of Gains and Losses from Sales of Property

A. Requirement of Realization
Sec. 38, Rev. Regs. No. 2
BIR Rul. No. DA (I-033) 584-2009, Oct. 8, 2009
B. Computation of Gain or Loss
Sec. 40(A), NIRC
Sec. 136 to 143, Rev. Regs. No. 2
a. Meaning of Basis
Sec. 40(B), NIRC
b. Meaning of Amount Realized
Sec. 40(A), NIRC
Rev. Regs. No. 6-2013, April 11, 2013
C. Non-Recognition of Gain or Loss on Certain Dispositions
Sec. 40(C), NIRC
Delpher Trades Corp. v. IAC, 157 SCRA 349, 356 (1988)
D. Preferential Treatment for Capital Gains
Sec. 39(B), NIRC
Sec. 39(C), NIRC
Sec. 39(D), NIRC
E. Definition of Capital Gains and Losses: Requirement of
Capital Asset
Sec. 39(A), NIRC
Sec. 132, Rev. Regs. No. 2
Corn Products Refining Co. v. CIR, 350 U.S. 46 (1955)
Roxas v. Court of Tax Appeals, supra, at 281-282
Calasanz v. CIR, 144 SCRA 664 (1986)

5
Tuason v. Lingad, 58 SCRA 170, 178 (1974)
Collector v. Bautista, 105 Phil. 1326, 1327 (1959)
China Banking Corporation v. CA, 336 SCRA 178 (2000)
F. Limitation on Capital Losses
Sec. 39(C), NIRC
China Banking Corporation v. CA, supra
G. Special Treatment of Sale of Real Property and Shares of
Stock
Sec. 24(C), NIRC
Sec. 25(A)(3), NIRC
Sec. 24(D), NIRC
Sec. 27(D)(2), NIRC
Sec. 27(D)(5), NIRC
Sec. 28(A)(7)(c), NIRC
Sec. 28(B)(5)(c), NIRC
Rev. Regs. No. 6-2008, April 22, 2008, as amended by
Rev. Regs. No. 6-2013, April 11, 2013
Sec. 256, Rev. Regs. No. 2
VII.

Definition of Corporation
Sec. 22(B), (C), NIRC
Rev. Mem. Circular No. 20-2010

VIII. Reallocation of Income and Deductions

Sec. 50, NIRC
CIR v. Estate of Benigno P. Toda, Jr., 438 SCRA 290 (2004)
Commissioner of Internal Revenue v. Menguito, 565 SCRA 461,
468-575 (2008)
Commissioner v. Filinvest Development Corp., G.R. No. 167689,
July 19, 2011, 654 SCRA 56 (2011)
Rev. Regs. No. 4-2011, March 15, 2011
A.
Tax Avoidance vs. Tax Evasion
B.
Meaning of Transfer Pricing
C.
Prima Facie Case of Substantial Underdeclaration
Sec. 248(B), NIRC
IX.

Accounting Periods and Methods of Accounting

Sec. 43 to 50, NIRC
Sec. 166 to 177, Rev. Regs. No. 2
Sec. 51-53, Rev. Regs. No. 2
A.
Fiscal Year vs. Calendar Year
Sec. 43, NIRC
B.
Cash Method vs. Accrual Method
Sec. 43 to 45, NIRC
CIR v. Isabela Cultural Corporation, 515 SCRA 556 (2007)
BIR Rul. No. 174-94, Dec. 12, 1994

6
BIR Rul. No. 259-91, Dec. 3, 1991
C. Change of Accounting Period
Sec. 46, NIRC
Rev. Regs. No. 3-2011, March 7, 2011
Rev. Regs. No. 9-2011, June 28, 2011
D. Accounting for Long-Term Contracts
Sec. 48, NIRC
Sec. 44, Rev. Regs. No. 2
E. Installment Sale vs. Deferred Payment Sale
Sec. 49, NIRC
F. Indirect Methods of Computing Income
Perez v. Court of Tax Appeals, 103 Phil. 1167
Aznar v. CTA, 58 SCRA 519 (1974)
X.

Income Taxation of Foreign Persons

A.
Operative Taxing Provisions of the NIRC
Sec. 24(A)(1)(c), NIRC
Sec. 25(A)(1), NIRC
Sec. 25(B), NIRC
Sec. 28(A)(1), NIRC
Sec. 28(B)(1), NIRC
B.
Resident Alien vs. Non-Resident Alien
Sec. 22(F), NIRC
Sec. 22(G), NIRC
Sec. 24(A)(1)(c), NIRC
Sec. 25(A)(1), NIRC
Sec. 25(B), NIRC
Sec. 5, Rev. Regs. No. 2
C. Non-Resident Alien Engaged in Trade or Business vs. NonResident Alien Not Engaged in Trade or Business
Sec. 25(A)(1), NIRC
Sec. 25(B), NIRC
Sec. 5 to 6, Rev. Regs. No. 2
Sec. 8, Rev. Regs. No. 2
D. Resident Foreign Corporation vs. Non-Resident Foreign
Corporation
Sec. 22(H) (I), NIRC
Sec. 28(A)(1), NIRC
Sec. 28(B)(1), NIRC
Sec. 28(A)(5), NIRC re. BPRT
Sec. 3(d), Rep. Act No. 7042 (Foreign Investments Act of
1991)
Sec. 1(f), IRR of Rep. Act No. 7042
Rev. Mem. Circular No. 55-80 (Dec. 3, 1980) re. BPRT
Marubeni Corp. v. CIR, 177 SCRA 500 (1989)

7
CIR v. CTA and Smith Kline and French Overseas Co., 127
SCRA 9 (1984)
E. Source Rules for Various Items of Income
Sec. 42, NIRC
CIR v. British Overseas Airways Corporation, 149 SCRA 395
(1987)
CIR v. Baier-Nickel, 500 SCRA 87, 100-102 (2006)
F. Special Treatment of Certain Foreign Persons or Some
Items of Income
Sec. 25(C) to (E), NIRC
Sec. 28(A)(3) to (4), NIRC
Sec. 28(A)(6) to (7), NIRC
Sec. 28(B)(2) to (4), NIRC
Rev. Regs. No. 11-2010, Oct. 26, 2010
South African Airways v. CIR, 612 SCRA 665 (2010)
XI.

Income Taxation of Estates and Trusts

Secs. 60-66, NIRC
Secs. 207-213, NIRC
CIR v. CA, 207 SCRA 487 (1992)
A.
General Rules on Taxability: Fiduciary or Beneficiary
B.
Personal Exemption Allowed
C.
Decedents Estate Administration
D.
Revocable Trusts
E.
Income for Benefit of Grantor

XII.

Tax Returns, Rates and Payments

A.
Individual Returns
Sec. 51, NIRC
Rev. Mem. Circular No. 40-2011, Sept. 2011
B.
Corporation Returns
Sec. 52, NIRC
Sec. 73(D), NIRC
Rev. Mem. Circular No. 40-2011, Sept. 2011
C.
Regular and Preferential Tax Rates
Sec. 24 to 25, NIRC
Sec. 27 to 28, NIRC
D.
Venue and Date of Filing and Payment
Sec. 51(B) to (C), NIRC
Sec. 52, NIRC
Sec. 74 to 77, NIRC
Rev. Regs. No. 13-2010, Nov. 25, 2010
Rev. Mem. Order No. 77-2010, Oct. 12, 2010
E.
Creditable and Final Withholding Taxes
Sec. 57 to 58, NIRC
Sec. 78 to 83, NIRC

F.
G.

Rev. Regs. No. 2-98 (April 17, 1998)

Rev. Mem. Circular No. 58-2008, Aug. 15, 2008
Rev. Regs. No. 12-2013, July 12, 2013 (effect of failure to
withhold)
Fringe Benefits Tax
Sec. 33, NIRC
Returns of General Professional Partnerships
Sec. 26, NIRC
Sec. 55, NIRC

XIII. Minimum Corporate Income Tax

Sec. 27(E), NIRC
Manila Banking Corporation v. CIR, 499 SCRA 782, 788-790
(2006)
CIR v. Philippine Airlines, Inc., G.R. No. 180066, July 8, 2009
XIV. Improperly Accumulated Earnings Tax
Sec. 29, NIRC
Rev. Regs. No. 2-01 (Feb. 12, 2001)
Rev. Mem. Circular No. 35-2011, March 14, 2011
BIR Rul. No. DA (C-005) 038-2010, March 4, 2010
BIR Rul. No. DA (C-328) 801-2009, Dec. 21, 2009
The Manila Wine Merchants, Inc. v. CIR, 127 SCRA 483 (1984)
Cyanamid Philippines, Inc. v. CA, et. al., G.R. No. 108067, Jan. 20,
2000
XV. Exempt Corporations and Others Taxed at Preferential
Rates
Sec. 30, NIRC
Secs. 27(B), (C), NIRC
Rev. Regs. No. 15-2013, Sept. 20, 2013 (Intl Carriers)
CIR v. CA, CTA and YMCA of the Phils., Oct. 14, 1998
PAGCOR v. The Bureau of Internal Revenue, et. al., G.R. No.
172087, March 15, 2011