allowableasdasdasdasdasdadeductions personal exemptions

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  • 8/18/2019 Allowableasdasdasdasdasdadeductions Personal Exemptions

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    Distinguish a “Exclusion from

    Gross Income” from “Deductions

    from Gross Income”. Give an

    example of each.

     2001 BAR Examination

    att. cleo d. sabado-andrada ca mba

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    Deductions from Gross Income

    Section 34

    Exclusions from Gross Income Section 32(B)

    Something paid or

    incurred in doingbusiness or trade

    Should not form part

    of gross income

    because excluded by law, by the

    constitution or does

    not fall within the

    definition of income.Pertains to the computation of

    ordinary taxable

    income.

    Pertains to the

    determination of

    Gross Income.

    att. cleo d. sabado-andrada ca mba

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    Section 34 of the NIRC

    SHA !"# APP$ #"

    G%"SS &"'P(!SA#I"! I!&"'(

    EXCEPT   Section 34 (M).

    &A! )( D(D*(D from

    Gross &ompensation Income

    Section 34 of the NIRC

    att. cleo d. sabado-andrada ca mba

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    Section 35 of the NIRC

    S*)S#I#*#(S +"% #H( DISA"A!&( "+ +A'I$, I-I!G and P(%S"!A (P(!S(S

    Kinds BASIC PERSONAL EXEMPION

    ADDIIONAL PERSONAL EXEMPIONatt. c

    leo d. sabado-andrada ca mba

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    Deductions from Gross Income

    Section 34

    Allo!"nce for Person"l Exem#tions

    Section 35

     Actual business

    expenses or

    expenses incurredin the exercise of

    profession

     Arbitrary amounts

    because it may not

    be enough to co/er personal li/ing

    expenses.

    #o reco/er the cost of doing

    business.

    #o co/er the family, li/ing and personal

    expenses.

    As to

    AMO$N

    As to P$RPOSE

    att. cleo d. sabado-andrada ca mba

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    Deductions from Gross Income

    Section 34

    Allo!"nce for Person"l Exem#tions

    Section 35

    )usiness

    (xpenses

    +amily, li/ing and

    personal expenses.

    &orporate

    #axpayers except

    NRFC, it can also be claimed by

    Indi/idual

    #axpayers except

    NRA-NETB.

    Indi/idual

    #axpayers only

    except NRA- 

    NETB.

    As to

    NA$RE

    As to CLAIMAN

    att. cleo d. sabado-andrada ca mba

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    Section 34 of the NIRC

    S%A&& ') A**&+ #" G%"SS &"'P(!SA#I"! I!&"'(

    EXCEPT   Section 34 (M).

    &A! )( D(D*(D from

    Gross &ompensation Income

    Section 34 of the NIRC

    att. cleo d. sabado-andrada ca mba

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    Section 34 of the NIRC

    #hese are amounts allo,ed - la, to

    reduce the gross income to taxable income.

    att. cleo d. sabado-andrada ca mba

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    Section 34 of the NIRC

    BASIC PRINCIPLES

     %e t"x#"&er must #oint to some s#eci'c #ro(isions of t%e st"tute)l"! "ut%ori*in+ t%e deduction,

    NON RESIDEN ALIEN NO

    ENGAGED IN RADE OR B$SINESS "nd NON RESIDEN -OREIGN

    CORPORAION "re not "llo!ed to cl"im deductions

    att. cleo d. sabado-andrada ca mba

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    Section 34 of the NIRC

    BASIC PRINCIPLES

    The taxpayer must prove that

    he is entitled to the deduction authorized or allowed.

    If the taxpayer fails to deduct certain expenses for the taxable year, he cannot

    deduct them from the income of the next or

    any succeeding year 

    att. cleo d. sabado-andrada ca mba

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    Section 34 of the NIRC

    BASIC PRINCIPLES

    Cohan Rule

    Principle 

    If expenses were incurred and there r no

    documentary evidence to support such, BIR must make an estimate of

    deduction that may be allowed in

    computing the taxpayer’s taxable

    income.

    disallowance of 867 of

    the taxpayer9s claimed

    deduction is -AID.att. cleo d. sabado-andrada ca mba

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    KINDS O- ALLO.ABLE DED$CIONS I.

     PREMIUM PAYMENTS ON HEALTH and/or HOSPITALIZATION INSURANCE

    (PHHI)Section 34(M)

     premiums paid during the taxable year or

    health and!or hospitali"ation insuranceta#en by him on himsel$ including his amily%

    "##lic"/le onl& to indi(idu"l

    att. cleo d. sabado-andrada ca mba

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    I.

     PREMIUM PAYMENTS ON HEALTH and/or HOSPITALIZATION INSURANCE

    (PHHI)

    CONDITIONS B&'R& P* S+,, B&

     +,,-&. +S .&./C0*1 'R RSS *1C&%

    0, %"t t%e family

     %"d " +ross income of not more t%"n t!o %undred 'ft& t%ous"nd

    #esos 1P2345444,446 for t%e t"x"/le &e"r,

    NUCLEAR

    FAMILY

    PARENTS and the CHILDREN who are not

    yet taxpayers their

    income notwithstandin .att. cleo d. sabado-andrada ca mba

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    I.

     PREMIUM PAYMENTS ON HEALTH and/or HOSPITALIZATION INSURANCE

    (PHHI)

    CONDITIONS B&'R& P* S+,, B&

     +,,-&. +S .&./C0*1 'R RSS *1C&%

    2, In case of married persons5 onl& t%e s#ouse cl"imin+ t%e "ddition"l exem#tions

    for de#endents s%"ll /e entitled to t%e deduction7

    att. cleo d. sabado-andrada ca mba

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    I.

     PREMIUM PAYMENTS ON HEALTH and/or HOSPITALIZATION INSURANCE

    (PHHI)

    CONDITIONS B&'R& P* S+,, B&

     +,,-&. +S .&./C0*1 'R RSS *1C&%

    8, %e deduction s%"ll not exceed P25944

    for t%e f"mil&5 or P244 " mont%,

    att. cleo d. sabado-andrada ca mba

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    KINDS O- ALLO.ABLE DED$CIONS II.

    OPTIONAL STANDARD DEDUCTION (OSD)Section 34(L)

      !  is a deduction from gross income allowed

    to be ta:en in lieu of the itemi1ed deductions.

    A""lica#le to IN!I$I!UAL (#%t not to non&'eient alien) 

    a""lica#le alo to CR*RA+IN a

    allo,e #y Sec. 3 of R.A. -54.att. cleo d. sabado-andrada ca mba

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    REEN!E RE"!LATI#NSREEN!E RE"!LATI#NS

    N#. $%&'(()N#. $%&'(() Implementing the Provisions of ection !"#$%Implementing the Provisions of ection !"#$%

    of the &ax 'ode of ())*, +s +mended byof the &ax 'ode of ())*, +s +mended by

    ection ! Republic +ct o. )-", /ealing onection ! Republic +ct o. )-", /ealing on

    the 0ptional tandard /eduction #0/%the 0ptional tandard /eduction #0/%

    +llowed to Individuals and 'orporations in+llowed to Individuals and 'orporations in'omputing their &axable Income'omputing their &axable Income

    att. cleo d. sabado-andrada ca mba

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    PERS#NS C#ERED*PERS#NS C#ERED*

    0.0. Indi/iduals;Indi/iduals; i. %esident &iti1eni. %esident &iti1en

    ii. !on

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    II.

    OPTIONAL STANDARD DEDUCTION (OSD)

     !

    RA+E

    4/

    "f Gross Sales=Gross

    %eceipts

    I!DI-ID*A #APA$(%S,

    other than NRA

    4/

    "f Gross Income &"%P"%A#(

    #APA$(%S 

    att. cleo d. sabado-andrada ca mba

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    It s%ould /e em#%"si*ed t%"t t%eIt s%ould /e em#%"si*ed t%"t t%e

    cost o salescost o sales in c"se ofin c"se of indi(idu"lindi(idu"l seller of +oodsseller of +oods5 or t%e5 or t%e cost o ser6ices cost o ser6ices   in t%ein t%e c"se of indi(idu"l seller ofc"se of indi(idu"l seller of

    ser(icesser(ices5 "re5 "re not allowed

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