chapter 3 Flashcards
all income derived from whatever source, including, but not limited to, the following items:
gross income
Compensation for services in whatever from paid, including, but not limited to fees, salaries, wages, commissions, and similar items;
gross income
derived from the conduct of trade or business or the exercise of a profession;
Gains derived from dealings in property;
Interest;
Rents;
Royalty;
gross income
all income derived from whatever source, including, but not limited to, the following items:
Dividends;
Annuities;
Prizes and winnings;
Pensions; and
Partner’s distributive share from the net income of the general professional partnership.
gross income
Rental income shall be taxable on the year received, whether earning or unearned, provided, there is no restriction as to its use, and regardless of method of accounting employment.
rental payment
Upon forfeiture in favor of the lessor, or
Upon application as rental payment.
security deposit
Improvements made by the lessee shall be treated as Income of the lessor. If:
LEASEHOLD IMPROVEMENTS
The Improvements will be owned by the lessor at the end of the ________
lease;
The _____ is not required to pay the lessee the value of such improvements.
lessor
____________ dividends shall be taxable upon declaration.
CASH & PROPERTY DIVIDENDS
GENERAL RULE: Distribution of stock dividend is not taxable because they are not realized income.
stock dividends
EXCEPTION: A stock dividend constitutes income if it gives the shareholder an interest different from that which his former stockholding represented.
stock dividends
are exempt up to the stockholder in liquidation is less than the cost of investment, the loss in the transaction is deductible to the extent allowed for capital losses.
LIQUIDATING DIVIDENDS
The ____ imposes a tax on income from whatever source which means that it includes income whether coming from legal or illegal sources. EXAMPLE:
law
Gross Income means all income derived from whatever source, including, but not limited to, the following items:
(Section 32, RA 8424)
GROSS INCOME,
Compensation for services in whatever from paid, including, but not limited to fees, salaries, wages, commissions,
and similar items;
gross income
derived from the conduct of trade or business or the exercise of a profession;
gross income
Gains derived from dealings in property;
4) Interest;
5) Rents;
6) Royalty;
7) Dividends;
8) Annuities;
9) Prizes and winnings;
10) Pensions; and
11) Partner’s distributive share from the net income of the general professional partnership.
gross income
Rental income shall be taxable on the year received, whether earning or unearned, provided, there is no restriction as to its use, and regardless of method of accounting employment.
outright
Book Value at the end of lease term/Remaining term of the lease.
spread out
KINDS:
1) Cash Dividends
2) Property Dividends
3) Stock Dividends
4) Liquidating Dividends
what kind of dividend?
dividend income
In order for recovery of bad debts to be considered income, the following must be compiled:
1) Bad debts were written of in the previous year/s;
2) Such bad debts were deducted in arriving at taxable income;
3) There is a resulting tax benefit in the deduction.
recovery of bad debts
The following are the requirements before refund of taxes be considered income:
1) There is payment of tax in the previous year/s;
2) The tax paid was deducted in arriving at taxable income;
3) There is a resulting tax benefit on the deduction.
refund of taxes
Debtor performs services to the creditor
what are the tax treatment?
Compensation Income
Creditor desires to benefit the debtor
without any consideration
what are the tax treatment?
gift
Creditor is a corporation and the debtor
is a stockholder of such corporation
what are the tax treatment?
dividend income
The proceeds of life insurance policies paid to the heirs or beneficiaries upon the death of the insured, whether in a single sum or otherwise, but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income.
life insurance
GENERAL RULE: Exempt from tax since it is a mere reimbursement for the loss of life.
EXCEPTION: The following shall be taxable:
1) The beneficiary was chosen for a valuable consideration.
2) The interest earned on the insurance policy.
life insurance
The amount received by the insured, as a return of premiums paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or the upon surrender of the contract.
return of premium
The Value of property acquired by gift, bequest, devise, or descent: Provided, however, that income from such property, as well as gift, bequest, device, or descent of income from any property, in cases of transfers of divided interest, shall be included in gross Income.
GIFTS, BEQUESTS & DEVISES
Amounts received, through Accident or Health Insurance or under Workmen’s Compensation Acts, as compensation for personal injuries or sickness, plus the amounts of any damages received, whether by suit or agreement, on account of such injuries or sickness.
COMPENSATION FOR INJURIES OR SICKNESS
Income of any kind, to the extent required by any treaty obligation binding upon the Government of the Philippines.
INCOME EXEMPT UNDER TREATY
1) Income derived from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in bank in the Philippines by:
a. Foreign governments
b. Financing institutions owned, controlled, or enjoying refinancing from foreign governments; and
c. International or regional financial institutions established by foreign governments.
miscellaneous items
2) Income derived from any public utility or from the exercise of any essential government function accruing to the Government of the Philippines or to any political subdivision thereof.
miscellaneous items
3) Prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement but only if:
a. The recipient was selected without any action on his part to enter the contest or proceeding; and
b. The recipient is not required to render substantial future services as a condition to receiving the prize or award.
miscellaneous items
6) GSIS, SSS, Medicare and Pag-Ibig contributions, and union dues of individuals.
7) Gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years.
miscellaneous items
4) All prizes and awards granted to athletes in local and international sports competitions and tournaments whether held in the Philippines or abroad and sanctioned by their national sports associations.
5) Gross benefits from 13th month pay and other benefits received
miscellaneous items
8) Gains realize by the investor upon redemption of shares of stock in a mutual fund company as defined in Section 22(BB) of this Code.
miscellaneous items
