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COLLEGE OF LAW
Bachelor of Laws
UNIVERSITY VISION
A globally recognized institution of higher learning that develops competent and morally
upright citizens who are active participants in nation building and responsive to the
challenges of 21st century.
UNIVERSITY MISSION
Batangas State University is committed to the holistic development of productive citizens
by providing a conducive learning environment for the generation, dissemination and
utilization of knowledge through innovative education, multidisciplinary research
collaborations, and community partnerships that would nurture the spirit of nationhood
and help fuel national economy for sustainable development.
PHILOSOPHY
The general principles of taxation and statutory provisions on income taxation, including
pertinent revenue regulations.
AUDIENCE
The course is intended for third-year law students. Students should have a good grasp of
the basics of Constitutional Law, Political Law, Obligations and Contracts,
Parternerships, Agencies and Trust, Corporation Law, and Remedial Law.
STUDENT OUTCOMES
Student Outcomes
Page 1 of 52
a. Develop clear understanding of basic principles, rules and doctrines
b. Define and access information needs; assess and organize information
and knowledge; produce, share, and utilize information and knowledge
c. Apply the basic principles, rules and doctrines to hypothetical and
actual cases
d. Demonstrate effective lawyering skills
e. Conduct legal research
f. Adhere to ethical standards and practices
g. Know and practice rights and responsibilities and accountabilities in
the legal profession
h. Engage in lifelong learning and understanding of the need to keep
abreast of the developments in the legal profession
i. Effectively communicate orally and in writing using both English and
Filipino
j. Recognize professional, social and ethical responsibility
SPECIFIC OBJECTIVES
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Teaching and Learning Strategies
All classes will be conducted utilizing a combination of the Socratic method of recitation,
workshop, and a practical application of the laws which may include the use of social
media that may be deemed appropriate to facilitate a better understanding of the course.
Law school is a professional school. Students must come to class prepared to recite the
assignments for the day. Soft copies of the Supreme Court decisions for discussion may
be downloaded from http://sc.judiciary.gov.ph, www.lawphil.net or the website of Chan
Robles.
Assessment Strategies
Students’ level of comprehension of the lessons would be assessed every meeting through
the conduct of regular recitation and would be further tested by the conduct of quizzes,
midterm exam and final exam.
COURSE REQUIREMENTS
1. Written Paper– Students in groups of 2 will be required to submit their written
report of not more than 10 pages on a topic of their choice related to TAXATION.
It may be a proposed change in the law or an in-depth research or analysis of a
provision of law or a recent significant Supreme Court decision. The written
paper must be submitted on or before the last day of classes. Late submission
will not be given any credit.
2. Recitation – Every meeting or class day, students will be called randomly to recite
on the provisions assigned for the day. Students whose class cards are drawn for
recitation but are absent will be given a grade of “5.”
3. Quizzes – Quizzes shall be given on topics or cases assigned for the day or for
topics discussed in previous sessions.
4. Mid-term exam – The Mid-term exam is a two (2) hour exam to be given on the
date assigned by the College for the class exam. It is a comprehensive exam
testing the ability of the student to apply the knowledge of the law in practical
situations. It will also include objective type of questions.
5. Final Exam – The final exam is a two (2) hour exam to be given on the date
assigned by the College for the class exam.
Bonus: A student with perfect attendance for the entire semester shall be entitled to an
additional three (3) percentile points on his grade. Therefore, if a student has a
computed grade of 85% based on the breakdown given above, then the final grade will be
88%.
7. Missed Exams - No student is excused from taking the midterm and final exams. The
only exceptions are death within the immediate family and sickness by the student, which
must be substatntiated by a death certificate or medical certificate, as the case may be, to
be submitted to the professor at least one day before the scheduled date of exam.
8. Consultation - Students may communicate with the professor for consultation via
email at attyedm@gmail.com.
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9. The final grade will be determined as follows:
Quizzes 15 %
Recitation 15 %
Written Paper 10 %
Midterm Exams 30 %
Final Exams 30 %
100 %
The conduct of Preliminary and Semi-final Examinations shall be discretionary on
the part of the professor. Should the professor decide to administer the said
exams, the final grade will be determined as follows:
Quizzes 15 %
Recitation 15 %
Written Paper 10 %
Prelims 5%
Midterm Exams 25 %
Semi-final Exams 5%
Final Exams 25 %
100 %
COURSE POLICIES
Grading System
The work of students shall be graded at the end of each term in accordance with
the following system:
Students who will get a grade of 70-74 must be given a removal examination. A
grade of “3.0’ will be given to those who will pass the removal examination and those
who will fail will be given a grade of “5.0”.
*A grade of “Incomplete” must be complied with by the student within one (1)
semester or one hundred fifty (150) days. A student who fails to complete the
deficiency/deficiencies at the end of the succeeding semester shall automatically obtain a
grade of 5.0 in the course.
Attendance Policy
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Prompt and regular attendance of students is required. Total unexcused absences
shall not exceed ten (10) percent of the maximum number of hours required per course
per semester (or per summer term). A semester has 18 weeks. For example, a semestral
subject with :
3 units (3 hrs lec), 10% x 3 x 18 = 5.4 hrs or 6 hrs.
3 units (2 hrs lec, 3 hrs lab), 10% x 5 x 18 = 9 hrs.
5 units (3 hrs lec, 6 hrs lab), 10% x 9 x 18 = 16.2 hrs or 16 hrs.
Please refer to the provisions in the Norms of Conduct for the full text of
guidelines for the attendance.
Missed Exams
In the event a student will miss any of the course requirements, he is solely responsible
for all the course materials/requirements taken in his absence. As a policy of the course,
make-up examination is not given. Grade for the missed major examination due to valid
justification(s) may be considered for a make-up examination.
Academic Dishonesty
Dropping
A student who unofficially drops out of class shall be given a mark of “5.0” by the
instructor.
Other Policies
It is imperative that you bring with you hard copies of the cases assigned.
Whether you are reciting or not, only five things should be on top of your
desk:
1. Your Outline;
2. Your hard copies of the cases assigned;
3. Your “Codal” (Tax Code, as amended by the TRAIN Law);
4. Your notebook or pad paper, for note-taking (sample will be
shown on the first day of class); and
5. Your pen/s.
ACADEMIC INFRASTRUCTURE
References
Page 5 of 52
The references listed are textbooks available in bookstores and (some) in our
campus library. All students are encouraged to gain access of these holdings for
better understanding and comprehension of our course. These books are used as
references:
Page 6 of 52
TENTATIVE COURSE OUTLINE/CALENDAR
Course outline
Page 7 of 52
(1) Piercing doctrine in corporation law
(a) Cases
(i) CIR v. Norton and Harrison, 11
SCRA 714
(ii) Marvel Building vs. David, 94 Phil.
376
(iii) Lidell & Co. v. Collector of Internal
Revenue, 1 SCRA 160
(iv) Yutivo Sons Hardware v. CTA, 2
SCRA 632
(b) Conclusion
(i) Formula for piercing in tax cases
(ii) What must be proved
(iii) What to look for
(iv) Takeaway (impact on business/BIR)
e) Distinctions between Tax and other impositions
(1) Tax vs. fee
(a) Distinctions
(b) Case: Angeles University Foundation v.
Angeles City G.R. No. 189999. June 27, 2012.
(2) Tax vs. debt
(a) Distinctions
(b) Exceptions to the rule that taxes are not
debts:
(3) Tax vs. Toll
(4) Tax vs. Penalty
(5) Tax vs. Special Assessment
B. No-no’s in Taxation (Doctrines) ***
1. No interest on tax refunds
2. No prescription on taxes
3. No liberal construction of tax exemptions
a) Soriano v. Secretary of Finance Soriano v. Secretary of
Finance, 24 January 2017, [G.R. No. 184450. January 24, 2017.]
4. No Injunction (Sec. 218, NIRC; Sec. 11, New CTA Law)
a) Tridharma Marketing Corporation v. CTA and CIR. [G.R.
No. 215950. June 20, 2016.]
Page 8 of 52
b) Spouses Pacquiao v. CTA [G.R. No. 213394. April 6,
2016.]
5. No writ of execution against the gov’t (Municipality of San
Miguel, Bulacan v. Hon. Oscar Fernandez, G.R. No. L-61744 June 25,
1984)
6. No set-off
a) The cases
(1) Republic v. Mambulao Lumber, G.R. No. L-177725,
28 February 1962
(2) Domingo v. Garlitos, 18 SCRA 443
(3) Francia v. IAC, 162 SCRA 753
(4) Philex Mining v. CIR, G.R. No. 125704, 28 August
1998
(5) United Airlines v. CIR [G.R. No. 178788.
September 29, 2010.]
b) Conclusion
(1) Are taxes really not debts?
(2) Is set-off really allowed? If so, when is it allowed?
7. No estoppel
a) Vera, et al. vs. Fernandez, et al., G.R. No. L-31364, March
30, 1979
b) Republic v. Ker & Co. Ltd., G.R. No. L-21609, 29
September 1966
c) China Banking Corporation v. CIR, G.R. No. 172509, 4
Feb 2015
d) CIR v. Kudos Metal Corp. GR No. 178087, 5 May 2010.
e) CIR v. San Roque Power Corp., GR No. 187485, 12 Feb
2013.
f) CIR v. Petron, GR No. 185568, 21 March 2012.
8. No solutio indebiti? (CIR vs. Acesite Hotel Corp, G.R. No.14795,
16 February 2007, 516 SCRA 93)
C. Scope of Taxation
1. Scope of Taxing Power
2. Is the power to tax the power to destroy? (Sison v. Ancheta, G.R.
No. 59431, 25 July 1984, 130 SCRA 654)
a) “The power to tax involves the power to destroy”- Chief
Justice Marshall
b) Justice Holmes: “The power to tax is not the power to
destroy while this Court sits”
Page 9 of 52
c) “So it is in the Philippines!”
d) Philippine Health Care v. CIR, G.R. No. 167330, 18
September 2009
3. Conclusion
Page 10 of 52
(1) Secs. 85 & 104, NIRC
c) The power to fix situs is legislative
d) Universal Factors for determination of situs
e) Situs Rules
(1) Residence tax
(2) Property tax
(a) Real property tax
(b) Tax on personal property1
(i) Tangible property
(ii) Intangible property
(3) Excise tax
(a) Income tax
(b) Donor’s Tax
(c) Estate Tax
(d) Value-Added Tax
4. International Comity
a) Rationale
b) Concept
c) Commissioner of Internal Revenue v. Frank Robertson, et
al., G.R. Nos. L-70116-19, 12 August 1986.
d) CIR v. Gotamco & Sons, G.R. L-31092, 27 February 1987
e) CIR v. Mitsubishi, G.R. Nos. 54908 and 80041, 22 January
1990
f) Deutsche Bank AG Manila Branch v. CIR, G.R. No.
188550. August 28, 2013.
5. Exemption From Taxation of Government Agencies
a) Rationale
b) Rule
B. Constitutional Limitations
1. Preliminaries
Page 11 of 52
(2) Main standard
(a) Lutz vs. Araneta. 98 Phil. 148
(b) Carlos Superdrug v. DSWD, G.R. No.
166494, 29 June 2007
(3) Is a retroactive tax law unconstitutional? (Testate
Estate of Fernandez v. Oasan Vda. De Fernandez, 99 Phil.
934)
(4) When is a tax law confiscatory?
(a) Churchill v. Rafferty, G.R. No. 10572, 21
December 1915
(b) Matalin Coconut v. Mun. Council of
Malabang, G.R. No. L-28138, 13 August 1986
(c) Carlos Superdrug v. DSWD, G.R. No.
166494, 29 June 2007
(d) Philippine Health Care Providers v. CIR ,
GR No. 167330, 18 September 2009.
(5) Due process and valuation
(a) Who’s better, Frank Chavez or JBL Reyes?
(i) Chavez v. Ongpin, G.R. No. 76778, 6
June 1990
(ii) Reyes v. Almanzor, G.R. Nos. 49839-
46, 26 April 1991 (196 SCRA 322)
(6) Due process and the presumption of validity of a tax
assessment
b) Equal Protection Clause (Art.III, Sec.1, 1987 Constitution)
***
(1) Concept
(2) Requisites for a Valid Classification
(3) Substantial distinction
(a) Sison v. Ancheta, 130 SCRA 654
(b) CREBA
(c) Manila Racehorse Trainers, 88 Phil. 60
(d) Association of Customs Brokers v.
Municipal Board of Manila, 93 Phil. 107
(4) “Germane to the purpose of the law” (Gomez v.
Palomar, 25 SCRA 827)
(5) Applicable to present and future conditions
(a) Ormoc Sugar Central
(b) Shell v. Vano, 94 Phil. 387
Page 12 of 52
(6) Geographic uniformity
c) Religious freedom (Art. III, Section 5, 1987 Consti.)*
(1) American Bible Society v. City of Manila, 101 Phil.
386
(2) Tolentino v. Sec. of Finance, 235 SCRA 630, citing
Jimmy Swaggart Ministries
(3) Sec. 30, NIRC
d) Non-impairment clause (Art. III, Sec. 10) **
(1) Rule
(2) Rationale
(3) Cases
(a) Tolentino v. Sec of Finance
(b) Philamlife v. Auditor General, 18 January
1968
(c) Casanovas v. Hord, GR No. 3473, 22 March
1907.
(d) CEPALCO vs. CIR, 25 September 1985;
Art. XII, Sec. 11, 1987 Constitution
(e) Mactan Cebu Int’l Airport Authority v.
Marcos, 261 SCRA 667
3. Direct Constitutional Limitations
a) Limitations on the authority imposing the tax
(1) Presidential veto (Art. VI, Sec. 27)
(a) General Rule: item veto is prohibited
(b) Exceptions
(c) “item” – CIR v. Manila Hotel and CTA,
[G.R. No. 83250. September 26, 1989.]
(2) Presidential pardon
(3) Flexible Tariff Clause (Art. VI Sec. 28[2])
(4) Local taxation
(a) Art. X Sec. 5, Sec. 6**
(b) Province of Batangas v. Romulo, 429 SCRA
81
(c) Mandanas v. Ochoa, [G.R. No. 199802.
July 3, 2018.]
(5) Power of the Supreme Court to review legality of
any tax, impost, assessment (Art. VIII, Sec. 5[2b])
Page 13 of 52
b) Limitations on the power to select the subjects of taxation
(1) Exemption of Charitable and Religious Institutions.
***
(a) Art. VI, Sec. 28(3)
(b) Coverage of exemption
(c) Lladoc v. Commissioner, 14 SCRA 292
(1965)
(d) Test of exemption
(i) Lung Center of the Philippines v.
Quezon City, 29 June 2004
(2) Non-Stock Non-Profit Educational Institutions
(Art. XIV, Sec. 4[3]) ***
(a) Coverage
(b) DOF Order No. 137-87
(c) Sec. 30, last paragraph
(d) CIR vs. YMCA, GR No. 124043, 14 October
1998
(e) CIR v. DLSU, [G.R. No. 196596. November
9, 2016.]
(f) La Sallian Educational Innovators
Foundation (De La Salles University – College of
St. Benilde) Inc. vs. Commissioner of Internal
Revenue, G.R. No. 202792. February 27, 2019
(3) How about the rule of non-diminution of salaries of
justices and judges? (Art. VIII, Sec. 10)
(a) Nitafan v. Commissioner, G.R. No. 78780,
July 23, 1987
(4) Passage of tax exemption law (Art. VI, Sec. 28[14)
c) Limitations meant to conform to social justice
(1) Progressive system of taxation (Art. VI Sec. 28[1];
Tolentino)
(2) Uniformity and equity of the rule of taxation (Art.
VI, Sec. 28[1]) ***
d) Limitations placed to prevent tyranny
(1) Appropriation, revenue, tariff bills to originate from
the House of Representatives (Art. III, Sec. 24)
Page 14 of 52
(a) “shall originate exclusively” (Tolentino)
(2) Non-imprisonment for non-payment of poll tax
(Art. III, Sec. 20)
e) Limitations on the collection and spending of tax money
(1) The need for an appropriation law
(2) Taxes levied for a special purpose (Art. VI, Sec.
29[3])
C. Double Taxation
1. Kinds
2. Direct Duplicate Taxation
a) City of Manila v. Coca-cola Bottlers (4 August 2009).
3. Indirect duplicate taxation
4. Legal tools to lessen the impact of double taxation
a) Deutsche Bank AG Manila Branch v. CIR, G.R. No.
188550. August 28, 2013.
5. Is double taxation a true limitation?
D. Principles of a Sound Taxing System
a) The Principles
(1) Fiscal adequacy
(2) Administrative feasibility
(3) Theoretical Justice
b) Nature of the Principles
c) Violation = Unconstitutionality or illegality?
E. Conclusion
Page 15 of 52
b) Tax laws must be considered reasonably to carry out the
purpose of the tax law.
3. Tax laws operate prospectively
4. Tax laws are special laws
5. Publication requirement
6. American precedents
a) Mandatory or persuasive?
b) Doctrine of Equitable Recoupment (Collector vs.
University of Santo Tomas, 104 Phil. 1062)
B. Tax Regulations
1. Sec. 244, NIRC
C. BIR Rulings
1. Non-retroactivity of rulings
a) General Rule: Sec. 246
b) Exceptions: Sec. 246
2 H. S. De Leon and H.M. De Leon Jr., The Fundamentals of Taxation (2009 edn.), pp. 62-66.
Page 16 of 52
D. Transformation
E. Tax avoidance and Tax Evasion
1. Tax avoidance
2. Tax evasion
3. CIR vs. Estate of Benigno Toda, 438 SCRA 290
4. Estate planning
F. Tax Exemptions
1. Definition3
a) Do local governments have the power to exempt?
2. Rationale of Tax Exemption4
3. Grounds for Tax Exemption
4. Nature of Tax Exemption5
a) A mere personal privilege of the grantee
b) Revocable by the government (Art. XII, Sec. 2, 1987
Consti.)
5. Kinds of tax exemptions6
6. Construction of tax exemptions
a) General rule: Laws granting tax exemption are construed
strictissimi juris against the taxpayer.
(1) Compagnie Financiere Sucres Et Denrees v.
Commissioner of Internal Revenue, G.R. No. 133834, 28
August 2006
(2) Luzon Stevedoring Corp. vs. Court of Tax Appeals,
et al., G.R. No. L-30232, July 29, 1988
b) Exceptions
(1) Soriano v. Secretary of Finance, 24 January 2017,
[G.R. No. 184450. January 24, 2017.]
7. Tax exemption is personal to the grantee
a) Phil Acetylene
b) Gotamco
c) Maceda
d) Silk Air
G. Compromise and Amnesty
3 Benjamin B. Aban, Law of Taxation in the Philippines (rev. ed., 2001), citing 51 Am. Jur. 503, p. 118.
4 H. S. De Leon and H.M. De Leon Jr., The Fundamentals of Taxation (2009 edn.), pp. 72-73
5 Ibid., pp. 74-75
6 Dictionary of Terms and Phrases in Taxation, p. 117.
Page 17 of 52
1. Compromise
a) General requirements
b) NIRC taxes
c) Customs cases
d) LGC
2. Amnesty
a) Concept
b) Amnesty vs. Exemption
V. TAXPAYER’S SUIT
A. Definition
B. When available
1. Maceda
C. When not available
1. Gonzales v. Marcos, 65 SCRA 624
INCOME TAXATION
I. OVERVIEW OF INCOME
TAXATION
2. Schedular
3. Semi-schedular or semi-
global
1. Direct tax
2. Progressive tax
3. Comprehensive system of
imposing income tax
Page 18 of 52
4. Semi-schedular or global tax
system
5. Of American origin
D. Criteria in Imposing
Philippine Income Tax
1. Source principle
2. Residence principle
3. Citizenship principle
II. INCOME
A. Definition of Income
3. Jurisprudence
c. There is REALIZATION
4. Recognition of income
1. Prefatory Discussion:
a. Nature of exclusions
Page 19 of 52
a. Rationale
b. Requirements
3. Return of Premiums
a. When excludable
c. Endowment policy
a. Policy
a. Rationale
b. Damages
Page 20 of 52
7. Retirement Benefits
8. Separation Pay
1) Requisites
8 Geronimo, General Principles, Slide 81; Reiterated in Commissioner v. Castaneda, 203 SCRA 72.
Page 21 of 52
f. gains from the sale of bonds, debentures, and other
certificates of indebtedness;
C. Taxable Period
1. Preliminaries9
2. Taxable periods
a. Calendar year
b. Fiscal year
3. Accounting methods
a. Introduction10
b. Accounting methods
1) Cash Method
2) Accrual method
a) Test
2) Test
d. Installment Method
4. Payment
a. Self-assessed
b. Payment
9 Citibank, N.A. vs. Court of Appeals, et al., G.R. No. 107434, October 10, 1997.
10 Consolidated Mines, Inc. vs. Court of Tax Appeals, G.R. Nos. L-18843 & 18844, August 29, 1974.
Page 22 of 52
c. FWT vs. CWT, CREBA v. Exec. Sec.
1. Sources of income
a. Interest
b. Dividends
c. Services
1) Test
a) BOAC case.11
4) Pre-paid tickets
III. TAXPAYERS
A. Taxation of taxpayers
according to source of income
1. Resident citizen
2. Non-resident citizen
3. Resident alien
6. Domestic corporation
7. Foreign corporation
Page 23 of 52
B. Taxation of taxpayers
according to nature of income
a. Individuals
b. Corporations
a. Individuals
b. Corporations
C. Taxpayers
a. “Residence”
b. Importance of Residence
c. Rationale
d. Section 22(e).
e. The RCs
1) Businessman/professional
a. Who is an NRC?
b. Tax base
c. Tax rate
a. Who is an RA?
Page 24 of 52
b. Test
c. Tax base
d. Tax rate
a. Who is a NRA?
b. The NRAs
1) Tax base
2) Tax Rate
1) Who is a NRANETB
2) Tax base
3) Tax rate
a. Test
b. Tax base
c. Tax rate
a. Tax base
b. Tax rate
7. Nonresident foreign
corporation (NRFC)
a. tax base
Page 25 of 52
b. tax rate
A. Taxable Income
B. “Gross Income”
D. Compensation income
3. Subject to creditable
withholding tax on compensation.
4. Taxable Income
E. Professional income
1. Definition
F. Fringe benefits
G. Business income
1. Nature
Page 26 of 52
2. Individual carrying on a
business
3. Rental income
H. Capital gains
1. Passive Income
a. Requisites
a. Requirements
b. Rate
c. Sale or exchange
1) Exchange
1) Citizens13
2) Aliens14
e. Corporations
1) Domestic Corporations15
2) FCs16
13 Sec. 24 (D)
15 Sec. 27 (D)(5)
Page 27 of 52
f. When the seller is a real estate dealer
I. Passive Income
1. Rule
2. Interest
a. General Rule
2) Corporations
h. Bonds
3. Royalties
a. Royalties Paid by a DC
b. If paid by a FC
4. Dividends
Page 28 of 52
a. Rules if paid by a DC
b. “Inter-corporate dividends”
c. Stock dividends
2) Exceptions:
d. Liquidating dividends
1) Treatment
3) TEST 18
4) Tax treatment
a) Mamalateo
a. RULES:
2) RCSEAL awards
4) Other prizes
b. BIR Ruling
J. Other income
18 Wise & Co., Inc. vs. Meer, G.R. No. 48231, June 30, 1947
Page 29 of 52
A. Preliminaries
1. Rationale
3. Construction of tax
deductions
4. Burden of proof
6. Basic requirements
a. Time requirement
7. Taxpayers entitled to
deductions
9. Classification
a. Current expense
b. Capital expenditures
a. Itemized Deductions
1. Business Expenses
a. Requisites
Page 30 of 52
2) Must be paid or incurred during the taxable year
(CIR v. Isabela Cultural Corporation)
b. Certain Expenses
1) Compensation
2) Fringe benefits
3) Transportation/travel expense
4) Rentals
5) Advertising Expense
7) Capital Expenditures
2. Interest
a. Requirements
1) Must be business-related.
Page 31 of 52
7) Must have been incurred or paid during the taxable
year
b. Tax Arbitrage
1) Definition20
c. Prohibited deductions
3. Bad debts23
a. Requirements:
4. Taxes
23 Sec. 34 (E)
Page 32 of 52
b. Components not deductible
c. CIR v. Palanca25
5. Losses
a. Requirements
b. Embezzlement Cases
a. Basic Theory
b. Definition of “depreciation”26
e. Depreciation of building
25 Commissioner of Internal Revenue vs. Carlos Palanca, Jr., G.R. No. L-16626, October 29, 1966
26 Basilan Estates, Inc. vs. Commissioner of Internal Revenue, et al., G.R. No. L-22492, September 5, 1967
Page 33 of 52
7. Sec. 34 (G) - Depletion of Oil
and Gas Wells and Mines
a. Requirements
b. Amount deductible
C. Special Deductions
b. Requirements
Page 34 of 52
D. Optional Standard
Deduction (OSD)
1. Preliminaries
3. 40% of what?
E. ITEMS NOT
DEDUCTIBLE FROM GROSS INCOME
F. TAX CREDIT
1. Definition
Page 35 of 52
a. Tax credit v. tax deduction
G. PERSONAL
EXEMPTIONS29
1. Preliminaries
b. Nature
c. Purpose
d. Rationale
2. Taxpayers entitled
4. Additional exemption
5. “dependents”
6. Change of Status
A. Coverage
1. Covered
2. Not covered
1. Tax treatment
30 Victorino C. Mamalateo, Philippine Income Tax (1st edn., 2004), pp. 86-87.
Page 36 of 52
a. Those necessary to the business of the employer
A. Overview
a. Cut-off is P250,000
2. Tax base
3. Tax Rate
4. Source
5. OSD
6. Progressive scheme of
taxation
B. Taxation of Resident
Citizens
1. Compensation earners
Page 37 of 52
b. Entitlement to personal exemptions
a. Requirements
b. Tax base
c. Tax consequences
a. RMC 50-2018
C. Taxation of non-resident
citizens
Page 38 of 52
1. Tax base and tax rate/s
2. Sec. 24 (B[1]
E. Taxation of NRAETBP
2. Exceptions31
3. Availability of itemized
deductions and OSD
F. Taxation of NRANETBPs
2. Availability of deductions
H. Entities treated as
individuals
I. OSD
A. Overview
1. “Corporation” includes
unregistered partnerships. (infra)
B. Domestic Corporations
1. Taxation
a. Source
b. Tax base
31 Hector S. De Leon and Hector M. De Leon, Jr., The Law on Income Taxation (13th edn., 2009), p. 325.
32 Ibid.
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c. Tax rate
2. Income of Domestic
Corporations subject to final tax
a. TRAIN changes
1) Dollar deposits
1) Predominance test
4. Government-owned &
controlled corporations
C. Resident Foreign
Corporations
1. Taxation
a. Source
b. Tax base
c. Tax rate
3. Special RFC’s
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a. International Carriers
1) Rate
a. Preliminaries
b. Definition
c. Rationale
d. Tax Base
e. Tax Rate
f. Requirement
D. Non-resident foreign
corporations
1. Taxation
a. Source
b. Tax base
c. Tax rate
3. Interest
4. Royalties
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5. Net capital gains realized
from sale of shares of stocks not traded in the stock exchange
E. Minimum Corporate
Income Tax
1. Preliminaries
b. Purpose
2. Nature of MCIT
3. Coverage
4. Start of coverage33
5. Suspension of MCIT
6. Carry-forward provision
F. IMPROPERLY
ACCUMULATED EARNINGS TAX
1. Concept
2. Rationale35
3. Nature
4. Presumption of unreasonable
accumulation
5. When justifiable
1) “Immediacy Test”36
33 Manila Banking Corp. vs. Commissioner of Internal Revenue, G.R. No. 168118, August 28, 2006.
34 Cyanamid Philippines, Inc. vs. Court of Appeals, et al., G.R. No. 108067, January 20, 2000
35 Commissioner of Internal Revenue vs. Ayala Securities Corp., et al., G.R. No. L-29485, November 21, 1980
36 Manila Wine Merchants, Inc. vs. Commissioner of Internal Revenue, G.R. No. L-26145, February 20, 1984
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7. Coverage of IAET
G. COMPARATIVE
ANALYSIS
1. Tax base
2. Tax Rate
3. Situs
4. Source
6. Deductions
A. Exempt Corps.
1. Constitutionally exempt
corporations
3. “Section 30”Corporations
4. General professional
partnerships
B. Section 30 Corporations
1. Primary Rule
37 Mamalateo says subject to 6% CGT but the Tax Code does not have a provision on CGT over real property when it comes to RFCs.
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2. Exempt Corporations
5. NSNP educational
institutions are now included among tax-exempt corporations.
X. TAXATION OF
PARTNERSHIPS
A. Taxation of Unregistered
Partnerships
a. Requisites of a partnership
b. Habituality
4. Cases
38 Commissioner of Internal Revenue vs. Court of Appeals, et al., G.R. No. 124043, October 14, 1998
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B. Partnerships vis-à-vis Co-
ownership
3. Termination of co-ownership
C. General Professional
Partnerships ***
2. Definition: partnership
engaged in the exercise of a common profession no part of the
income of which is derived from trading or business;
D. Joint Ventures
1. Tax treatment
a. Requirements
b. Taxable events
A. Treatment
B. Estates
1. Definition of estate
3. Tax treatment
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b. Exceptions
C. Trusts
a. Accumulation trust
c. Discretionary trust
a. Grantor trusts
b. Employees’ trust
3. Multiple trusts
A. PRELIMINARIES
B. COMPUTATION OF
GAIN/LOSS
1. Basic formula
a. For GAIN
b. For LOSS
C. FACTORS IN
DETERMINING GAIN OR LOSS
D. BASIS
1. Meaning of basis
2. Determination of basis
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a. If the property is acquired by purchase
1) If acquired by inheritance.
2. Ordinary assets
3. RULE OF THUMB:
4. Examples of CA’s
5. Tests
a. Liquidating rule/theory
39 Calasanz vs. Commissioner of Internal Revenue, G.R. No. L-26284, October 9, 1986.
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b. PURPOSE of acquisition
6. Importance of distinction
between capital and ordinary assets
7. SMI-ED Philippine
Technology, Inc. .v. CIR, G.R. No. 175410, November 12, 2014
G. TAX-FREE EXCHANGES
1. Preliminaries
a. Rationale
2. Tax-free exchanges
a. Statutory merger/consolidation
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b. De facto merger
1) Sec. 51(D)
2) Sec. 24(A)
3) (Sec. 51 (D)
A. When paid
2. Exceptions
A. Sec. 57 - Withholding of
Tax at Source
40 Sec. 51(A)(1)
41 Sec. 51(A)(2)
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1. Reasons for devising the
withholding tax system.42
42 . Citibank, N.A. vs. Court of Appeals, et al., G.R. No. 107434, October 10, 1997
43 Commissioner of Internal Revenue vs. Procter & Gamble Philippine Mfg. Corp., G.R. No. 66838, December 2, 1991
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Week Topic/s References
1 Part I: Power of Taxation Recalde, De Leon, Vitug,
Part II: Limitations Aban, Geronimo,
(refer above) Mamalateo, 1987
Constitution, CTA Law
& National Internal
Revenue Code
2 Parts II & III: Limitations and Tax Recalde, De Leon, Vitug,
Laws Aban, Geronimo,
(refer above) Mamalateo, 1987
Constitution, CTA Law
& National Internal
Revenue Code
3 Parts IV & V Escape from Taxation Recalde, De Leon, Vitug,
Taxpayer’s Suit, Aban, Geronimo,
Preliminaries in Income Taxation Mamalateo, 1987
Income Constitution, CTA Law
(refer above) & National Internal
Revenue Code
4 Exclusions Recalde, De Leon, Vitug,
Taxpayers Aban, Geronimo,
Source of Income Mamalateo, 1987
Preliminary Examination Constitution, CTA Law &
National Internal Revenue
Code
5-8 Gross Income Recalde, De Leon,
Taxable Income Geronimo, Mamalateo,
Deductions Train Law & National
(refer above) Internal Revenue Code
9 Fringe Benefits Tax Recalde, De Leon, Aban,
Vitug, Geronimo,
Midterm Examination Mamalateo, Train Law &
National Internal Revenue
Code
10-13 Individual Income Taxation Recalde, De Leon,
Corporate Taxation Geronimo, Mamalateo,
(refer above) Train Law & National
Internal Revenue Code
14 Exempt Corporations, Partnerships, Recalde, De Leon, Aban,
Estates, and Trusts Vitug, Geronimo,
Mamalateo, Train Law &
Semifinal Examination National Internal Revenue
Code
(refer above)
15-17 Gains & Losses from Dispositions of Recalde, De Leon,
Property, Tax-free Exchanges, Filing Geronimo, Mamalateo,
of ITR, Payment, and Withholding Train Law & National
(refer above) Internal Revenue Code
18 Review Recalde, De Leon, Aban,
Vitug, Geronimo,
Final Examination Mamalateo, Train Law &
National Internal Revenue
Code
Prepared by:
____________________
Page 51 of 52
Atty. Edwin D. Malabanan
Part-time Professor
Date Signed:
____________________
Atty. Edgard E. Valdez
Dean, College of Law
Date Signed
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