University of St.

La Salle

TAXATION M.V.U. SIA

TAX.404—ALLOWABLE DEDUCTIONS 1st SEMESTER AY 2022-2023

LEARNING OBJECTIVES

1. Identify the kinds of deductions.

3. Determine the expenses/losses not allowed as deduction
2. Know the requisites for claiming deductions

REVIEW NOTES

ALLOWABLE DEDUCTIONS, DEFINED 1. A reasonable allowance for salaries, wages, and other forms
of compensation for personal services actually rendered,
Deductions are items or amounts which the law allows to be including the grossed-up monetary value of fringe benefit
deducted from gross income of certain taxpayers. furnished or granted by the employer to the employee:
Provided, That the final tax imposed under Section 33
This is only allowed to taxpayers subject to graduated income hereof has been paid;
tax rate, in the case of individuals, and Regular Corporate
Income Tax for Corporations. 2. A reasonable allowance for travel expenses, here and
abroad, while away from home in the pursuit of trade,
KINDS OF DEDUCTIONS business or profession;

1. Itemized Deductions 3. A reasonable allowance for rentals and/or other payments

2. Optional Standard Deduction which are required as a condition for the continued use or
3. Special Deductions possession, for purposes of the trade, business or
profession, of property to which the taxpayer has not taken
ALLOWABLE DEDUCTIONS IN RELATION TO TAXPAYER or is not taking title or in which he has no equity other than
AND TYPE OF INCOME that of a lessee, user or possessor;

TAXPAYER ALLOWABLE 4. A reasonable allowance for entertainment, amusement and

DEDUCTIONS recreation expenses during the taxable year, that are
Individuals earning pure directly connected to the development, management and
NONE operation of the trade, business or profession of the
compensation income
Individuals deriving taxpayer, or that are directly related to or in furtherance of
income from trade, Itemized deduction or the conduct of his or its trade, business or exercise of a
business or practice of Optional Standard profession not to exceed such ceilings as the Secretary of
profession. Deduction Finance may, by rules and regulations prescribe, upon
Corporations recommendation of the Commissioner: Provided, That any
expense incurred for entertainment, amusement or
ITEMIZED DEDUCTION recreation that is contrary to law, morals public policy or
public order shall in no case be allowed as a deduction.
1. Ordinary and necessary trade, business or professional
expenses 5. Upon effectivity of CREATE (April 11, 2021), an additional
2. Interest deduction from taxable income of one-half (1/2) of the
3. Taxes value of labor training expenses incurred for skills
4. Losses development of enterprise-based trainees enrolled in
5. Bad debts Public Senior High Schools, Public Higher Education
6. Depreciation Institutions, or Public Education Institution, or Public
7. Depletion Technical and Vocational Institutions and duly covered by
8. Charitable Contribution an apprenticeship agreement under PD No. 442, Series of
9. Research and development 1974, or the Labor Code of the Philippines, as amended,
10. Contributions to Pension Trust shall be granted to enterprises. Provided, further, that for
additional deduction for enterprise-based training of
ORDINARY AND NECESSARY TRADE, BUSINESS OR students from Public Educational Institutions, the
PROFESSIONAL EXPENSES enterprise shall secure proper “certification” from the
Department of Education (DepEd), Technical Educational
There shall be allowed as deduction from gross income all the and Skills Development Authority (TESDA), or Commission
ordinary and necessary expenses paid or incurred during the on Higher Education (CHED). Provided, finally, that such
taxable year in carrying on or which are directly attributable to, deduction shall not exceed Ten Percent (10%) of Direct
the development, management, operation and/or conduct of the Labor Wage.
trade, business or exercise of a profession, including:

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income: Provided, however, That the taxpayer's otherwise

SUBSTANTIATION REQUIREMENTS allowable deduction for interest expense shall be reduced 33%
(25% starting July 1, 2020 for Corporate taxpayers subject to
Deduction mentioned above shall only be disallowed if the 20% pursuant to CREATE and zero for Corporate taxpayers
taxpayer can substantiate with sufficient evidence, such as subject to 20%).
official receipts or other adequate records:
1. the amount of the expense being deducted, and REQUISITES FOR DEDUCTIBILITY
2. the direct connection or relation of the expense being 1. The indebtedness must be that of the taxpayer;
deducted to the development, management, operation 2. The interest must have been stipulated in writing;
and/or conduct of the trade, business or profession of the 3. The interest must be legally due;
taxpayer. 4. The interest payment arrangement must not be between
related taxpayers as mandated in Sec. 34(B)(2)(b), in
BRIBES, KICKBACKS AND OTHER SIMILAR PAYMENTS relation to Sec. 36(B)both of the Tax Code of 1997;
5. The interest must not be incurred to finance petroleum
No deduction from gross income shall be allowed for any operations; and
payment made, directly or indirectly, to an official or employee 6. The interest was not treated as “capital expenditure”, if such
of the national government, or to an official or employee of any interest was incurred in acquiring property used in trade,
local government unit, or to an official or employee of a business or exercise of profession.
government-owned or -controlled corporation, or to an official
or employee or representative of a foreign government, or to a In the case of corporations, since the income tax rates changed
private corporation, general professional partnership, or a effective July 1, 2020, it follows that the reduction of deductible
similar entity, if the payment constitutes a bribe or kickback. interest expense of 20% (33% prior to CREATE) shall be
effective also on the said date. For other domestic corporations
REQUISITES FOR DEDUCTIBILITY with net taxable income not exceeding P100,000,000, excluding
1. Must be ordinary and necessary; the land on which the particular business entity’s office, plant
2. Paid or incurred during the taxable year; and equipment are situated, and their taxable income does not
3. Connected with trade, business or practice of profession; exceed P5,000,000, the reduction is 0% since there is no
4. Supported by sufficient evidence; and difference in the income tax rate on the taxable income (20%)
5. Not against the law, morals, public policy or public order; with the tax rate applied on the interest income subjected to
6. It must have been subjected to withholding tax, if final tax (20%). In other words, if the applicable RCIT rate is
applicable. 20%, interest expense is fully deductible. However, in the case
of individuals engaged in business or practice of profession,
ENTERTAINMENT, AMUSEMENT AND RECREATION EXPENSE such deduction shall take effect upon the effectivity of CREATE.

AMOUNT DEDUCTIBLE - lower Amount between: AMOUNT DEDUCTIBLE

1. Actual
2. Limit IN GENERAL:
Interest Expense PXXX
LIMIT Less: (Interest Income subject to
Sale of Goods or Net Sales x ½ of 1% final tax x 33%/20%) (XXX)
Properties Deductible Interest PXXX
Sale of services Net Revenue x 1%
TRANSITORY PROVISIONS
MINOR OR ORDINARY REPAIRS & MAINTENANCE
For the rate to be used in the deduction of a certain percentage
KIND OF REPAIR TREATMENT of interest income subject to final tax from the claimed interest
Repairs that materially expense to come up with the allowable interest expense, or the
add to the value of the Capitalize interest arbitrage, the following shall be applied for taxable year
property 2020 by corporations, except non-resident foreign
Repair that appreciably corporations:
prolong the life of the Capitalize
property Compute for the interest arbitrage using the applicable rate:
Repair that keeps the a) Divide the gross interest income subjected to final tax for
property in its ordinarily Outright Expense the year by 12 months:
efficient operating Interest income subjected to final tax ÷ 12
condition b) Multiply the number of months applicable to old arbitrage
rate by the resulting monthly gross interest income
ORGANIZATIONAL AND PRE-OPERATING EXPENSES subjected to final tax; then multiply the product by the old
arbitrage rate:
Organizational and pre-operating expenses are considered as Number of months applicable x (a) x 33.33%
capital expenditures. However, upon start of commercial c) Multiply the number of months applicable to the new
operations, it can be amortized over 60 months. arbitrage rate by the resulting monthly gross interest
income subjected to final tax; then, multiply the product by
INTEREST EXPENSE the new arbitrage rate:
Number of months applicable x (a) x (20% or 0%, as the
The amount of interest paid or incurred within a taxable year on case may be)
indebtedness in connection with the taxpayer's profession, d) Add the computed interest arbitrage under items (b) and
trade or business shall be allowed as deduction from gross (c) above to get the amount to be deducted from the interest
expense claimed to arrive at the allowable interest expense.

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EXCEPTION TAXES

Interest expense on tax delinquency or deficiency, provided, the The term “taxes” means taxes proper and no deductions should
tax is related to trade, business or practice of profession shall be be allowed for amounts representing interest, surcharge, or
100% deductible. penalties incident to delinquency.

OPTIONAL TREATMENT OF INTEREST GENERAL RULE – Taxes paid or incurred within the taxable year
in connection with the taxpayer’s profession, trade or business,
Interest expense related to acquisition of property used in trade, shall be allowed as deduction.
business or profession may, at the option of the taxpayer, be:
1. Claimed as outright expense; or EXCEPTION – The following taxes are not deductible:
2. Capitalize and claim depreciation. 1. Income tax
2. Income tax paid abroad if claimed as tax credit
TIME WHEN ADVANCE INTEREST CAN BE CLAIMED BY 3. Estate tax
INDIVIDUAL UNDER CASH BASIS 4. Donor’s tax
5. Special assessment
If within the taxable year an individual taxpayer reporting 6. VAT
income on the cash basis incurs an indebtedness on which an 7. Stock transaction tax
interest is paid in advance through discount or otherwise, the
same shall be allowed as a deduction in the year the LOSSES
indebtedness is paid: Provided, further, That if the indebtedness
is payable in periodic amortizations, the amount of interest KINDS OF LOSSES
which corresponds to the amount of the principal amortized or
paid during the year shall be allowed as deduction in such 1. Losses in General
taxable year. 2. Casualty Losses
3. Voluntary removal of buildings
NON-DEDUCTIBLE INTEREST 4. Loss of value
5. Net operating loss carry-over (NOLCO)
1. Interest paid to persons classified as related taxpayers 6. Capital losses and securities becoming worthless
under Section 36 (B) of RA 8424 shown below; 7. Special Losses
a) Losses from wash sales of stock or securities
a) Between members of a family. b) Wagering losses
c) Abandonment losses
For purposes of this paragraph, the family of an
individual shall include only his brothers and sisters LOSSES IN GENERAL
(whether by the whole or half-blood), spouse,
ancestors, and lineal descendants; or Losses must usually be evidenced by closed and completed
transactions. Proper adjustment must be made in each case for
b) Except in the case of distributions in liquidation, expenditures or items of loss properly chargeable to capital
between an individual and corporation more than fifty account, and for depreciation, obsolescence, amortization, or
percent (50%) in value of the outstanding stock of depletion. Moreover, the amount of the loss must be reduced by
which is owned, directly or indirectly, by or for such the amount of any insurance or other compensation received,
individual; or and by the salvage value, if any, of the property. A loss on the
sale of residential property is not deductible unless the property
c) Except in the case of distributions in liquidation, was purchased or constructed by the taxpayer with a view to its
between two corporations more than fifty percent subsequent sale for pecuniary profit. No loss is sustained by the
(50%) in value of the outstanding stock of which is transfer of property by gift or death. Losses sustained in illegal
owned, directly or indirectly, by or for the same transactions are not deductible.
individual if either one of such corporations, with
respect to the taxable year of the corporation preceding CASUALTY LOSSES
the date of the sale of exchange was under the law
applicable to such taxable year, a personal holding Losses sustained due to fires, storms, shipwreck, or other
company or a foreign personal holding company; casualties, or from robbery, theft or embezzlement are
deductible provided the following requisites are present;
d) Between the grantor and a fiduciary of any trust; or 1. The property lost is connected with the trade, business or
practice of profession;
e) Between the fiduciary of and the fiduciary of a trust and 2. Actually sustained during the taxable year;
the fiduciary of another trust if the same person is a 3. Not compensated for by insurance or other forms of
grantor with respect to each trust; or indemnity
4. Incurred in trade, profession or business
f) Between a fiduciary of a trust and beneficiary of such 5. Reported with the BIR within forty-five (45) days from the
trust. time of loss; and
6. Not claimed as deduction for estate tax purposes.
2. If the indebtedness is incurred to finance petroleum
exploration;

3. Interest on preferred stock.

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VOLUNTARY REMOVAL OF BUILDINGS

ABANDONMENT LOSSES
Loss due to the voluntary removal of or demolition of old
buildings, the scrapping of old machinery, equipment, etc., 1) In the event a contract area where petroleum operations
incident to renewals and replacements will be deductible from are undertaken is partially or wholly abandoned, all
gross income. When a taxpayer buys real estate upon which is accumulated exploration and development expenditures
located a building, which he proceeds to raze with a view to pertaining thereto shall be allowed as deduction.
erecting thereon another building, it will be considered that the
taxpayer has sustained no deductible expense on account of the 2) In case a producing well is subsequently abandoned, the
cost of such removal. unamortized costs thereof, as well as the undepreciated
costs of equipment directly used therein, shall be allowed as
LOSS OF USEFUL VALUE deduction.

When through some change in business conditions, the EFFECT IF ABANDONED WELL IS REENTERED AND
usefulness in the business of some or all of the capital assets is PRODUCTION IS RESUMED OR EQUIPMENT IS RESTORED INTO
suddenly terminated, so that the taxpayer discontinues the SERVICE
business or discards such assets permanently from use of such
business, he/it may claim as deduction the actual loss sustained. If the abandoned well is re-entered and production is resumed
or equipment is restored into service, the effects are:
NET OPERATING LOSS CARRY-OVER 1. The amount previously claimed as deduction shall be
recognized as income; and
“Net Operating Loss” means the excess of allowable deduction 2. Such amount shall also be capitalized and amortized or
over gross income of the business in a taxable year. depreciated, as the case may be.

The net operating loss of the business or enterprise for any BAD DEBTS
taxable year shall be carried over as a deduction from gross
income for the next three (3) consecutive taxable years Receivables which are no longer collectible are deductible,
immediately following the year of such loss. However, business provided the following requisites are present:
or enterprise which incurred net operating loss for taxable 1) There must be an existing indebtedness due to the taxpayer
years 2020 and 2021 shall be allowed to carry-over the same as which must be valid and legally demandable;
a deduction from gross income for the next five (5) consecutive 2) The same must be connected with the taxpayer’s trade,
taxable years immediately following the year of such loss. business or practice of profession;
3) The same must not be sustained in a transaction between
REQUISITES FOR DEDUCTIBILITY: related taxpayers;
1. On the year of net loss, the taxpayer must not be exempt 4) The same must be actually charged off in the books of
from income tax (Income tax holiday); and accounts of the taxpayer as of the end of the taxable year;
2. There is no substantial change in the ownership of the and
business or enterprise in that – 5) The same must be actually ascertained to be worthless and
a) Not less than seventy-five (75%) in nominal value of uncollectible.
outstanding issued shares, if the business is in the name
of a corporation, is held by or on behalf of the same In the case of Philippine Refining Co. vs. Court of Appeals (G.R.
persons; or No. 118794 dated May 8, 1994), the Court held that there are
b) Not less than seventy-five (75%) of the paid-up capital steps outlined to be undertaken by the taxpayer to prove that he
of the corporation, if the business is in the name of a exerted diligent efforts to collect the debts, viz:
corporation, is held by or on behalf of the same persons. a. Sending of statement of accounts
b. Sending of collection letters;
NOLCO FOR MINES OTHER THAN OIL & GAS WELLS c. Giving the account to a lawyer for collection; and
d. Filing a collection case in court.
For mines other than oil and gas wells, net operating loss
incurred in any of the first ten (10) years of operation may be SECURITIES BECOMING WORTHLESS
carried over for the next five (5) years.
If securities are ascertained to be worthless and charged off
LOSSES FROM WASH SALES OF STOCK OR SECURITIES within the taxable year and are capital assets, the loss resulting
therefrom shall, in the case of a taxpayer other than a bank or
In case of any loss claimed to have been sustained from any sale trust company incorporated under the laws of the Philippines a
or other disposition of shares of stock or securities shall not be substantial part of whose business is the receipt of deposits, be
deductible if: considered as a loss from the sale or exchange, on the last day of
1) The seller is not a dealer in securities; such taxable year, of capital assets.
2) Within a period of thirty (30) days before the sale ending
thirty (30) days after the sale, the seller either: DEPRECIATION
a) Acquired (by purchase or exchange) stock or securities
identical to the stock or securities sold; or There shall be allowed as a deduction a reasonable allowance
b) Has entered into a contract or option to acquire stock or for the exhaustion, wear and tear (including reasonable
securities identical to the stock or securities sold. allowance for obsolescence) of property used in the trade or
business, provided the following requisites are present:
WAGERING LOSSES 1) The property subject to depreciation is used in the trade,
business or practice of profession;
Losses from wagering transactions shall be allowed only to the
extent of the gains from such transactions.

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2) The allowance for depreciation must be sustained by the PROPERTIES USED IN MINING OPERATIONS
person who owns or who has a capital investment in the
property; If expected life of property Normal rate of
3) The allowance for depreciation must be reasonable; is ten (10) years or less depreciation (depreciate
4) The allowance for depreciation should not exceed the cost over actual useful life)
of the property; If expected life is more Depreciated over any
5) The schedule of the allowance must be attached to the than ten (10) years number of years between
return. five (5) years and the
expected life.
USE OF CERTAIN METHODS AND RATES
DEPRECIATION DEDUCTIBLE BY NON-RESIDENT ALIENS
The term 'reasonable allowance' shall include, but not limited ENGAGE IN TRADE OR BUSINESS OR RESIDENT FOREIGN
to, an allowance computed in accordance with rules and CORPORATIONS
regulations prescribed by the Secretary of Finance, upon
recommendation of the Commissioner, under any of the In the case of non-resident aliens engage in trade or business or
following methods: resident foreign corporations, depreciation shall be allowed
1) Straight-line method only if the property is located in the Philippines.
2) Declining-balance method – rate should not exceed twice
the rate in straight-line method OBSOLESCENCE MAY BE DEDUCTED IN ADDITION TO
3) Sum-of-the-years-digit method; and DEPRECIATION
4) Any other method which may be prescribed by the
Secretary of finance upon recommendation of the BIR. Allowance for obsolescence may be deducted in addition to
reasonable allowance for the exhaustion, wear and tear.
AGREEMENT AS TO USEFUL LIFE ON WHICH DEPRECIATION
RATE IS BASED EXPENSES ALLOWABLE TO PRIVATE EDUCATIONAL
INSTITUTIONS
Where under rules and regulations prescribed by the Secretary
of Finance upon recommendation of the Commissioner, the A private educational institution may at its option elect either:
taxpayer and the Commissioner have entered into an agreement a) to deduct expenditures otherwise considered as capital
in writing specifically dealing with the useful life and rate of outlays of depreciable assets incurred during the taxable
depreciation of any property, the rate so agreed upon shall be year for the expansion of school facilities; or
binding on both the taxpayer and the National Government in b) to deduct allowance for depreciation.
the absence of facts and circumstances not taken into
consideration during the adoption of such agreement. The DEPLETION OF OIL AND GAS WELLS AND MINES
responsibility of establishing the existence of such facts and
circumstances shall rest with the party initiating the In case of oil and gas wells or mines, capital invested may be
modification. Any change in the agreed rate and useful life of the amortized using cost-depletion method, provided:
depreciable property as specified in the agreement shall not be 1) When allowance for depletion shall equal capital invested,
effective for taxable years prior to the taxable year in which no further allowance shall be granted;
notice in writing by certified mail or registered mail is served by 2) After production in commercial quantities has commenced,
the party initiating such change to the other party to the intangible exploration and development drilling costs
agreement: shall be treated as follows:

Provided, however, that where the taxpayer has adopted such INTANGIBLE EXPLORATION AND DEVELOPMENT
useful life and depreciation rate for any depreciable and claimed DRILLING COSTS
the depreciation expenses as deduction from his gross income, KINDS TREATMENT
without any written objection on the part of the Commissioner Incurred for non- Deductible in the year
or his duly authorized representatives, the aforesaid useful life producing wells and/or incurred.
and depreciation rate so adopted by the taxpayer for the mines
aforesaid depreciable asset shall be considered binding. At the option of the
taxpayer:
PROPERTIES USED IN PETROLEUM OPERATIONS
Incurred for producing OPTION 1 – Deductible in
Properties directly related 1) Straight-line wells and/or mines full in the year paid or
to production 2) Declining-balance incurred; or
method
OPTION 2 – Capitalize
NOTE: Useful life to be and amortize.
used is shorter period
between: 'Intangible costs in petroleum operations' refers to any cost
a. 10 years; or incurred in petroleum operations which in itself has no salvage
b. Useful life value and which is incidental to and necessary for the drilling of
Properties not directly - Only straight-line wells and preparation of wells for the production of petroleum:
related to production method is allowed Provided, That said costs shall not pertain to the acquisition or
- Useful life is always improvement of property of a character subject to the allowance
presumed to be 5 for depreciation except that the allowances for depreciation on
years. such property shall be deductible under this Subsection.

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Any intangible exploration, drilling and development expenses government corporations, exclusively to be used in
allowed as a deduction in computing taxable income during the undertaking priority activities in:
year shall not be taken into consideration in computing the a. Education;
adjusted cost basis for the purpose of computing allowable cost b. Health;
depletion. c. Youth
d. Sports development;
ELECTION TO DEDUCT EXPLORATION AND DEVELOPMENT e. Human settlements;
EXPENDITURES f. Science and culture;
g. Economic development.
In computing taxable income from mining operations, the
taxpayer may at his option, deduct exploration and 2) Donations to foreign institutions or international
development expenditures accumulated as cost or adjusted organizations which are fully deductible in pursuance of:
basis for cost depletion as of date of prospecting, as well as a. Agreements;
exploration and development expenditures paid or incurred b. Treaties;
during the taxable year: Provided, That the amount deductible c. Commitments; or
for exploration and development expenditures shall not exceed d. Special laws.
twenty-five percent (25%) of the net income from mining
operations computed without the benefit of any tax incentives 3) Donations to Accredited Non-government Organizations
under existing laws. The actual exploration and development
expenditures minus twenty-five percent (25%) of the net The term “non-government organization” means a non-
income from mining shall be carried forward to the succeeding profit domestic corporation:
years until fully deducted. a. Organized and operated exclusively for:
i. Scientific;
The election by the taxpayer to deduct the exploration and ii. Research;
development expenditures is irrevocable and shall be binding in iii. Educational;
succeeding taxable years. iv. Character building;
v. Youth and sports development;
'Net income from mining operations' shall mean gross income vi. Health;
from operations less 'allowable deductions' which are vii. social welfare;
necessary or related to mining operations. 'Allowable viii. Cultural;
deductions' shall include mining, milling and marketing ix. Charitable purposes; or
expenses, and depreciation of properties directly used in the x. A combination thereof.
mining operations. This paragraph shall not apply to
expenditures for the acquisition or improvement of property of b. No part of the net income of which inures to the benefit
a character which is subject to the allowance for depreciation. of any private individual;

In no case shall this paragraph apply with respect to amounts c. Not later than 15th day of the third (3rd) month after the
paid or incurred for the exploration and development of oil and close of the taxable year in which contributions are
gas. received, makes utilization, unless an extended period
is granted by the Secretary of Finance, upon
The term 'exploration expenditures' means expenditures paid recommendation of the Commissioner of Internal
or incurred for the purpose of ascertaining the existence, Revenue.
location, extent or quality of any deposit of ore or other mineral,
and paid or incurred before the beginning of the development d. The level of administrative expense of which shall, on
stage of the mine or deposit. an annual basis, in no case to exceed thirty percent
(30%) of the total expenses;
The term 'development expenditures' means expenditures paid
or incurred during the development stage of the mine or other e. The assets of which, in the event of dissolution, would
natural deposits. The development stage of a mine or other be distributed to:
natural deposit shall begin at the time when deposits of ore or i. Another domestic corporation organized for
other minerals are shown to exist in sufficient commercial similar purpose or purposes; or
quantity and quality and shall end upon commencement of ii. The state for public purposes; or
actual commercial extraction. iii. Another organization to be used in such
manner as in the judgement of the court shall
DEPLETION OF OIL AND GAS WELLS AND MINES DEDUCTIBLE best accomplish the general purpose for which
BY A NON-RESIDENT ALIEN INDIVIDUAL OR FOREIGN the dissolved organization was organized.
CORPORATION
Per special laws, donations made to the following are
In the case of non-resident aliens engage in trade or business or deductible in full:
resident foreign corporations, depletion shall be allowed only if 1. Integrated Bar of the Philippines (P.D.181)
the oil and gas wells or mines are located in the Philippines. 2. International Rice Research Institute (R.A. 2707)
3. Development Academy of the Philippines (P.D. 205)
CHARITABLE CONTRIBUTIONS 4. The University of the Philippines & other state colleges
5. Cultural Center of the Philippines
FULLY DEDUCTIBLE DONATIONS 6. Artesian Well Fund (R.A. 1977)
7. Ramon Magsaysay Award Foundation
The following charitable contributions shall be fully deductible: 8. Task Force on Human Settlement
1) Donations to the Government of the Philippines or to any of 9. Donations to the National Museum of the Philippines
its agencies or political subdivisions including fully owned (RA No. 11333)

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10. Donation to National Performing Arts Companies (RA purposes is not the proper amount to be used in determining
No. 11392) Pension Liability in determining deductible Pension Trust.
11. National Commission on Culture
12. Humanitarian Science Foundation PAST SERVICE COST
13. National Social Action Council
Past service cost is the excess of actual contributions over the
DONATIONS SUBJECT TO LIMIT Normal Cost. It shall be amortized over ten (10) years.
The following donations, which do not fall under fully
deductible donations, shall be subject to limit: OPTIONAL STANDARD DEDUCTION (OSD)
1) Donations to the Government of the Philippines or
any agencies or any political subdivision thereof In lieu of the itemized deductions, an individual subject to
exclusively for public purposes; graduated rate, other than a non-resident alien, may elect a
2) Donations to accredited domestic corporations or standard deduction in an amount not exceeding forty percent
associations operated exclusively for: (40%) of his gross sales or gross receipts, as the case maybe. In
a. Religious; the case of a corporation subject to RCIT, it may elect a standard
b. Charitable; deduction in an amount not exceeding forty percent (40%) of its
c. Scientific; gross income.
d. Youth and sports development;
e. Cultural; Unless the taxpayer signifies in his return his intention to elect
f. Educational the optional standard deduction, he shall be considered as
g. Rehabilitation of veterans; having availed himself of the itemized deductions. Such election
h. Social welfare institutions; or when made in the return shall be irrevocable for the taxable
i. Non-government organization. year for which the return is made.

LIMIT An individual who is entitled to and claimed optional standard

TAXPAYER LIMIT deduction shall not be required to submit with his tax return
Rate Base such financial statements.
Corporation 5% Taxable Income from trade,
Individual 10% business or practice of A general professional partnership and the partners comprising
profession before charitable such partnership may avail of the optional standard deduction
contributions only once, either by the general professional partnership or the
partners comprising the partnership.
VALUATION IN CASE OF DONATION OF NON-CASH PROPERTY
Except when the Commissioner otherwise permits, the said
The amount of any charitable contribution of property other individual shall keep such records pertaining to his gross sales
than money shall be based on the acquisition cost. or gross receipts, or the said corporation shall keep such records
pertaining to his gross income.
RESEARCH AND DEVELOPMENT
The following may be allowed to claim OSD:
If not chargeable to capital Claim as outright expense 1) Individuals
account a. Resident Citizen
If chargeable to capital At the option of the b. Non-resident citizen
account but not chargeable taxpayer: c. Resident alien
to property subject to d. Taxable estates and trusts
depreciation or depletion OPTION 1 – Claim as
outright expense. 2) Corporations
a. Domestic corporation
OPTION 2 – Amortize over b. Resident foreign corporation
60 months.
If chargeable to property Capitalize AMOUNT DEDUCTIBLE
subject to depreciation or
depletion Individuals Gross Sales/Gross Receipts x
40%
PENSION TRUSTS Corporations Gross Income x 40%

AMOUNT DEDUCTIBLE A. NON-DEDUCTIBLE ITEMS

Actual contribution to the extent of pension PXXX 1) Bribes, kickbacks and other similar payments;
liability* 2) Personal, living or family expenses;
3) Any amount paid out for new buildings or for permanent
Amortization of Past Service Cost XXX improvements, or betterments made to increase the value
Total PXXX of any property or estate, except intangible drilling and
* Compare actual contribution and Normal Cost whichever is development costs incurred in petroleum operations which
lower are deductible;
4) Any amount expended in restoring property or in making
PENSION LIABILITY good the exhaustion thereof for which an allowance is or
Pension liability is equivalent to Normal Cost per Actuarial has been made
Valuation Report (AVR) for funding purposes. AVR for PAS 19 5) Premiums paid on any life insurance policy covering the life
of any officer or employee, or of any person financially

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interested in any trade or business carried on by the d. Between the grantor and a fiduciary of any trust; or
taxpayer, individual or corporate, when the taxpayer is e. Between the fiduciary of a trust and fiduciary of
directly or indirectly a beneficiary under such policy. another trust if the same person is the grantor
6) Interest, Losses and Bad Debts: with respect to each trust; or
a. Between members of a family. Family of an individual f. Between a fiduciary of a trust and a beneficiary of such
shall include only his brothers and sisters (whether by trust.
the whole or half-blood), spouse, ancestors, and lineal
descendants; or SPECIAL DEDUCTIONS ALLOWED TO INSURANCE
b. Except in the case of distributions in liquidation, COMPANIES
between an individual and a corporation more than
fifty percent (50%) in value of the outstanding stock of In the case of insurance companies, whether domestic or foreign
which is owned, directly or indirectly, by or for such doing business in the Philippines, the following are deductible:
individual; or 1) Net additions made within the year to reserve funds; and
c. Except in the case of distributions in liquidation, 2) The sum other than dividends paid within the year on policy
between two corporations more than fifty percent and annuity contracts.
(50%) in value of the outstanding stock of each of which
is owned, directly or indirectly, by or for the same NOTE: Released reserve shall be treated as income for the year
individual, if either one of such corporations, with of release.
respect to the taxable year of the corporation preceding
the date of the sale or exchange was a personal holding
company;

DISCUSSION QUESTIONS

Allowable deductions, defined 5. Drei Corporation incurred rent expense amounting to

1. Which of the following is not a characteristic of a deduction? P500,000. Drei paid the lessor the gross amount of
a. It is a reduction of wealth that helped earn the income P500,000 without deducting 5% withholding tax. How
subject to tax. much rent expense can Drei claim as allowable deduction
b. It is not a receipt. from its gross income?
c. It is a subtraction to arrive at income subject to tax. a. P500,000 c. P475,000
d. An immunity or privilege, a freedom from a charge or b. P450,000 d. nil
burden to which others are subjected.
6. ARC Inc. paid for the regular repairs and maintenance of its
2. Statement 1: A taxpayer can only deduct an item or amount facilities to Johnson Manpower Services (JMS). How much
from gross income only if there is a law authorizing such a is the applicable withholding tax on such income payment?
deduction. a. Exempt from withholding tax
Statement 2: For income tax purposes, a taxpayer is free to b. 1% withholding tax on its gross payment
deduct from the gross income the full amount of the c. 2% withholding tax on its gross payment
deduction allowed, or a lesser amount or not to claim any d. 5% withholding tax on its gross payment
deduction at all.
a. Statements 1 & 2 are false 7. Buladaco Manufacturing Corporation hired Cabarles, Ong,
b. Statement 1 is true but statement 2 is false Sia & Tabag (COST & Co.) for its annual financial statement
c. Statement 1 is false but statement 2 is true audit for 2020 taxable year. Buladaco agreed to pay COST
d. Statements 1 and 2 are true & Co. for its services amounting to P2,000,000. Such
payment to SCT & Co. shall be:
Allowable deductions in relation to taxpayer and type of a. Exempt from withholding tax
income b. 1% withholding tax on its gross payment
3. Which of the following is not allowed to claim allowable c. 2% withholding tax on its gross payment
deductions in computing income tax? d. 5% withholding tax on its gross payment
a. Individual taxpayer engaged in business or practice of
profession 8. All of the following, except one, are not deductible from
b. Individual taxpayer who is a pure compensation gross income
income earner a. Tuition fees and other expenses of the taxpayer's
c. Corporation engaged in business children
d. All of the choices b. Replacement of the roof of the office building
c. Premiums paid in insuring the life of the Corporate
Ordinary and necessary trade, business or professional President, appointing the employer-corporation as the
expenses beneficiary of the policy
4. Which of the following is allowable compensation expense d. Premiums paid on a life insurance policy of a rank-and-
of an employer? file employee with the latter's children as the appointed
I. Salary of employee paid for a limited period of time beneficiary
after his death to his widow.
II. Manager’s expense account subject to fringe benefit tax. 9. On January 1, 2018, Paquito leased his vacant lot for a
a. I only c. I and II period of 12 years to Romar at an annual rate of P2,400,000.
b. II only d. Neither I nor II It was also agreed that Romar will pay the following:

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 P4,800,000 representing rental payment for year 2018 How much is the additional Allowable Deductions on
and 2019. Training Expenses?
 Security deposit of P2,400,000. a. P3,000,000 c. P1,500,000
 Annual real property tax of P30,000. b. P1,000,000 d. P2,500,000

The lease contract provides, among others that the lessee 15. Based on the preceding number, suppose the direct labor
will construct a 5-storey building for parking purposes at a wage is only P10,000,000, the additional deduction that can
cost of P9,500,000. Ownership of the building shall belong be allowed is:
to the lessor upon the expiration or termination of the lease a. P3,000,000 c. P1,500,000
contract. b. P1,000,000 d. P2,500,000

The building was completed on July 1, 2020 with an Interest expense

estimated useful life of 15 years. How much can Romar
claim as deduction in relation to the lease in 2018? 16. JBC Corporation borrowed money from the Bank
a. P2,430,000 c. P2,400,000 amounting to P1,000,000 at an annual interest rate of 7%.
b. P4,830,000 d. P4,800,000 He invested the money in deposit substitutes earning
annual interest income of 8%. How much is the deductible
10. Using the same information above, how much can Romar interest assuming the transaction happened in 2021 and
claim as deduction in relation to the lease in 2020? JBC is using Calendar Year accounting period?
a. P2,430,000 c. P2,400,000 a. P43,600 c. P54,000
b. P2,930,000 d. P3,063,333 b. P48,800 d. P80,000

11. JAO Corporation is engaged in the sale of goods and services 17. Using the data in number 19 except JBC Corporation is
with net sales/net revenue of P3,000,000 and P2,000,000 subject to 20% RCIT?
respectively. The actual entertainment, amusement and c. P43,600 c. P54,000
recreational (EAR) expense for the taxable year totaled d. P48,800 d. P70,000
P30,000.
18. This is a deductible interest expense
How much is the deductible EAR expense? a. Interest paid on indebtedness between related
a. P30,000 c. P25,000 taxpayers
b. P27,000 d. nil b. Interest paid on preferred stock
c. Interest paid when there is no stipulation for the
12. Which of the following can be deducted from gross income payment thereof
in the year paid or incurred? d. Interest on deposits paid by authorized banks of the
a. Repairs that materially add to the value of the property BSP to depositors, if it is shown that the tax on such
b. Repair that appreciably prolong the life of the property interest was withheld and paid
c. Repair that keeps the property in its ordinarily efficient
operating condition 19. Which of the following items may be allowed as deduction
d. All of the choices from gross income?
a. Interest paid on tax delinquency
13. Which of the following expenses is not deductible from b. Fines and penalties for late payment of taxes
gross income? c. Interest paid on indebtedness incurred to finance
a. Salaries and wages of employees. petroleum exploration
b. Entertainment, amusement and recreation expenses. d. Interest on unpaid salaries and bonuses
c. Rental expenses.
d. Bribes, kickbacks and other similar payments. 20. How shall interest related to acquisition of property used in
trade, business or profession be treated?
14. MOC Corporation, a domestic manufacturing corporation, a. Claim as outright expense
had gross sales of P100,000,000 for Fiscal Year ending June b. Capitalize
30, 2021 and incurred cost of sales of P60,000,000 and c. At the option of the taxpayer, may be claimed as
operating expenses of P17,500,000, with the following outright expense or capitalize
details: d. At the option of the government, may be claimed as
Cost of Sales outright expense or capitalize
Direct Materials P 30,000,000
Direct Labor 20,000,000 21. On January 1, 2019 MJ Corporation contracted a 1-year
Manufacturing Overhead 10,000,000 P100,000 loan from Metrobank for the purchase of
Total P 60,000,000 computers. The equipment which had a depreciable life of
Operating Expenses eight (8) years were acquired on April 1, 2019. The interest
Salaries and Wages 7,000,000 expense for the year 2019 amounted P15,000.
Taxes 300,000
Depreciation 3,500,000 In the same year, his bank deposit with PNB earned an
Professional Fees 200,000 interest income of P2,000. During the year, he incurred an
interest expense on unpaid business tax of P600.
Advertising Expenses 3,000,000
Training Expenses 3,000,000
The deductible interest expense of MJ Corporation in 2019
Office Supplies 500,000
assuming it did not capitalize the interest is –
Total P 17,500,000 a. P14,240 c. P14,760
b. P13,600 d. P14,940

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22. Based on the preceding number, if interest expense was 30. Which of the following taxes incurred in the conduct of
capitalized, how much was the total allowable deduction? business is not allowed as deduction from business income?
a. P11,381 c. P10,721 a. Foreign income tax claimed as tax credit
b. P10,781 d. P600 b. Documentary stamp tax
c. Import duties
23. Mrs. Sarabia is using cash basis of accounting. She borrowed d. Local business tax
money from the bank in 2018 payable after 2 years in lump
sum. The proceeds given to her was already net of P100,000 Losses
interest. When can she claim as deduction the said interest?
a. In 2018 31. Which of the following items of expenses require that notice
b. In 2019 be filed with the BIR to be allowed as deduction from gross
c. In 2020 income?
d. Spread over the term of the loan a. Taxes c. Losses
b. Interest d. Salaries
24. The following interest are non-deductible, except?
a. Interest paid to persons classified as related taxpayers 32. The net operating loss of the business or enterprise for any
under Section 36 (B) of RA 8424 taxable year immediately preceding the current taxable
b. Interest related to indebtedness incurred to finance year, which had not been previously offset as deduction
petroleum exploration from gross income shall:
c. Interest on preferred stock a. Be carried over as a deduction from gross income for
d. Interest related to indebtedness incurred to finance the next 3 consecutive taxable years immediately
working capital requirements following the year of such loss.
b. Be carried over as a deduction from gross income for
Taxes the next 5 consecutive taxable years immediately
following the year of such loss.
25. Which of the following is not a requisite for taxes to be c. Not be carried over as a deduction from gross income
deductible? in any of the succeeding years.
a. Must have been paid or incurred within the taxable d. Be carried over as a deduction from gross income in any
year. of the succeeding years until it is fully offset.
b. Deductible only by the person/s upon whom the tax is
imposed by law. 33. Based on the preceding number, suppose the loss was
c. Must be in connection with the taxpayer's profession, sustained in 2020 or 2021, the NOLCO shall be carried over
trade, or business. as deduction from gross income for how long?
d. Must be imposed by the national government. a. 3 years
b. 5 years
26. Which of the following is non-deductible? c. 10 years
a. Percentage tax on common carriers by land d. Not allowed
b. Franchise tax
c. Overseas communications tax 34. Continuing number 32, suppose the loss happened in the
d. Stock transaction tax year when the taxpayer is enjoying Income Tax Holiday
(ITH), the NOLCO shall be carried over as deduction from
27. Mapanlinlang Corporation was assessed by the BIR due to gross income for how long?
underpayment of Percentage Taxes. The Assessment Notice a. 3 years
disclosed the following: b. 5 years
Basic Tax P 1,000,000 c. 10 years
Surcharge 250,000 d. Not allowed
Interest 200,000
Penalties 25,000 35. Enrica Tabang owns 50% of Enrico Corporation (EC).
Total P 1,475,000 Enrica sold a property valued at P1,000,000 to EC for
P800,000. Is the loss deductible?
It also generated interest income from bank deposits a. Yes, because Enrica and EC are not considered related
amounting to P100,000. How much is the deductible parties.
interest? b. No, because Enrica and EC are considered related
a. P200,000 c. P167,000 parties.
b. P162,000 d. nil c. Yes, because the sale results from sale of property.
d. No, because the amount of loss cannot be identified
28. Based on the above problem, how much is the deductible with certainty.
taxes?
a. P1,275,000 c. P1,250,000 36. During 2018, Enrico created a trust in favor of his friend
b. P1,000,000 d. nil Apol. He appointed Atty. Ong as the trustee. A month later,
Leomar created a trust in favor of his affectionate friend,
29. Based on the data in Number 33, but the tax underpaid is Drei. Leomar appointed John as the trustee. Later during
donor’s tax, how much is the deductible interest and tax? the year, Atty. Ong sold a property to John at a price which
a. P200,000 and P1,000,000, respectively is substantially lower than the property’s current market
b. P200,000 and zero, respectively value. Can Atty. Ong deduct the loss as a result of the sale?
c. Zero and P1,000,000, respectively a. No, because both Atty. Ong and John were fiduciaries of
d. Zero for both items trusts.
b. Yes, because Atty. Ong and John are fiduciaries of
different grantors.

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c. No, because Atty. Ong does not have a capital gain. 44. Emang acquired a property for use in her business. After a
d. Yes, because losses as a rule are deductible devastating typhoon, the machinery suffered partial
damage. The following were made available:
37. Based on the preceding number, suppose both trusts were Cost P500,000
created by Enrico, can Atty. Ong deduct the loss as a result Accumulated depreciation 300,000
of the sale? Restoration cost 250,000
a. Yes, since losses are always deductible Estimated useful life 5 years
b. No, since Atty. Ong and John are considered related
parties How much is the deductible loss?
c. Yes, since Atty. Ong and John are not related parties a. P0 c. P250,000
d. None of the choices b. P200,000 d. P100,000

38. Which of the following losses is not deductible? 45. One of the following losses cannot be deducted from gross
a. Abandonment losses in petroleum operation. income.
b. Excess of expenses over gross income from sale of a. To construct a bigger warehouse, a corporation
ordinary assets. demolished an old warehouse which had a construction
c. Losses on wash sales of stocks. cost of P3,000,000 and a book value of P500.000.
d. Losses on sale of investments. b. Demolition of a building existing on a land purchased
where the corporation has no use for the building at the
39. Which of the following taxpayers may be allowed to claim time of purchase and it was its intention to remove the
losses from wash sales as deduction? building in order to build its factory.
a. Dealer in Real Properties c. A corporation retired its machinery from the business
b. Dealer in personal properties because of the increase in the cost of production and
c. Dealer in securities the failure of the machinery to meet the desired
d. Investor in shares of stocks number of units of production.
d. A corporation ascertained that its B Corp. stocks are
40. ABC, whose taxable year is the calendar year, provided the worthless because of the total insolvency of B Corp.
following acquisitions and disposals of its investments in
shares of stocks: 46. Dong, a gambling addict, won P90,000 from cockfighting
 September 21, 2019, purchased 100 shares of the during the year. However, he also suffered losses from other
common stock of XYZ Company for P50,000. gambling activities amounting to P200,000. How much is
 December 21, 2019, purchased 50 shares of the deductible loss?
substantially identical stock for P27,500, and on a. P200,000 c. P90,000
December 26, 2019, 25 additional shares of such stock b. P110,000 d. nil
for P11,250.
 January 2, 2020, it sold for P40,000 the 100 shares 47. SNJ Inc. purchased shares of stock of P Corp. for P60,000
purchased on September 21, 2018. and of Boba Co. for P30,000. At the end of the taxable year,
it was ascertained that its P Corp. stock was worthless
How much is the indicated loss? because of the complete insolvency of the corporation, and
a. P10,000 c. P2,500 its Boba Co. shares value had declined to P28,000.
b. P7,500 d. P0
How much is the deductible loss of SNJ Inc.?
41. How much is the deductible loss? a. P90,000 c. P60,000
a. P10,000 c. P2,500 b. P62,000 d. nil
b. P7,500 d. P0
Bad debts
42. Sira Sira Company had an old warehouse which had a cost
of P1,200,000. The company demolished the warehouse 48. When shall bad debts be allowed as deduction from gross
when it had a book value of P200,000 in order to construct income?
a new and bigger warehouse. The demolition cost a. Upon setting up of allowance for doubtful accounts
amounted to P25,000 while the scraps were sold for b. Upon write-off in the books
P10,000. How much is the deductible loss in arriving at c. At the option of the taxpayer, upon setting up of
taxable income? allowance or upon write-off
a. None c. P200,000 d. At the option of the government, upon setting-up of
b. P185,000 d. P215,000 allowance or upon write-off

43. On July 1, 2017, a taxpayer purchased for P500,000 an Depreciation

automobile which will be used exclusively for his practice.
He deducted annual depreciation on the basis of an 49. A taxpayer is allowed to use declining balance method in
estimated useful life of five (5) years. On July 1, 2020, the claiming depreciation. In such a case, the limitation is –
automobile was partially damaged in an accidental collision a. It should not exceed twice the rate in straight-line
with another vehicle. The cost of repairs amounted to method
P100,000. The taxpayer received insurance proceeds of b. It should not exceed twice the rate in sum-of-the-years
P70,000 to cover the loss. How much is the deductible loss? digit method
a. P200,000 c. P130,000 c. It should not exceed the rate in straight-line method
b. P100,000 d. P30,000 d. It should not exceed the rate in sum-of-the-years digit
method

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50. BSE College, a proprietary educational institution, spent a. P2,250,000 c. P750,000

P10 million for the construction of a new school building. b. P1,500,000 d. P400,000
The amount spent for the construction -
a. Must be claimed as expense in the year of completion Pension trusts
b. Capitalized and claim annual depreciation over the life
of the building 57. DLC Corp. contributed P4,000,000 to its pension plan
c. Capitalized or expensed outright at the option of the during the year 2019. The Normal Cost (NC) appearing on
school the Actuarial Valuation Report (AVR) for funding purposes
d. Capitalized or expensed outright at the option of the is only P3,000,000. The AVR for PAS 19 purposes disclosed
BIR that the Current Service Cost (CSC) is P3,200,000. How
much can DLC Corp. claim as deduction?
51. Non-resident aliens engage in trade or business as well as a. P4,000,000 c. P3,100,000
resident foreign corporations are also allowed to claim b. P3,000,000 d. P3,280,000
depreciation in arriving at taxable income. Which of the
following is an absolute requirement before depreciation 58. Continuing the information above, assuming in 2020 DLC
can be claimed? Corp. contributed only P2,000,000 while the NC is
a. The property, regardless of location, directly helped in P3,100,000 and CSC is P3,300,000, how much is the
the generation of income in the Philippines. deductible amount?
b. The property, regardless of location, helped, directly or a. P2,100,000 c. P2,080,000
indirectly, in the generation of income in the b. P3,000,000 d. P3,100,000
Philippines.
c. The property is used in trade or business regardless of Special deductions for Insurance Companies
location
d. The property must be located in the Philippines 59. Which of the following is deductible to an insurance
company?
a. Increase in policy reserve which is a mere provision
Charitable contributions b. Increase in Incurred but not reported (IBNR)
c. Both “a” and “b”
52. Which of the following is deductible from gross income d. Neither “a” nor “b”
even if the payment is not connected with business?
a. Contribution of the employer to the pension trust of the Optional standard deduction
employee
b. Charitable contributions 60. Optional standard deduction is allowed to
c. Income tax paid in foreign country a. Non-resident alien engaged in business
d. Travelling expenses b. Non-resident alien not engaged in business
c. Resident alien
53. Which of the following charitable contributions is not fully d. Non-resident foreign corporation
deductible?
a. Donation to the Government of the Philippines to 61. Who is allowed to use Optional Standard Deduction?
finance priority projects identified by NEDA a. Non-resident citizen
b. Donation to the Municipality of Milagros in the b. Non-resident alien engaged in trade or business
Province of Masbate for the repair of Municipal Hall c. Non-resident alien not engaged in trade or business
c. Donation to International Organizations d. None of the choices
d. Donation to accredited Non-government Organizations
62. A retailer of goods has gross sales of P1,000,000 with a cost
54. Mr. Mapagbigay had the following data during 2020: of sales amounting to P800,000. Assuming that the taxpayer
Gross income from business P1,000,000 is an individual and opted to claim optional standard
Compensation income 40,000 deduction, how much is the taxable income?
Long-term Capital gain 50,000 a. P600,000 c. P120,000
Short-term Capital loss 20,000 b. P550,000 d. P80,000
Operating expenses 400,000
Donation to an accredited NGO 30,000 63. Based on the preceding number, if the taxpayer is a
Donation to church 40,000 corporation, how much is the taxable income?
a. P600,000 c. P120,000
How much is the taxable income? b. P550,000 d. P80,000
a. P575,000 c. P535,000
b. P525,000 d. P555,000 64. The taxpayer is a domestic corporation:
Gross sales P9,350,000
55. Based on the above problem, but the taxpayer is a Sales returns and allowances 250,000
corporation, how much is the taxable income (ignore Sales discounts 100,000
compensation income)? Interest income on trade notes 150,000
a. P570,000 c. P560,000 receivable
b. P545,000 d. P600,000 Other income 50,000
Cost of sales 3,000,000
56. Chinito Corporation (CC) made various donations under the Operating expenses with vouchers 4,000,000
Adopt-A-School Program of the Department of Education and receipts
under R.A. 8525 amounting to P1,500,000. The net income Operating expenses without 500,000
of CC before deducting the P1,500,000 is P8,000,000. How vouchers and receipts
much is the deductible donation for income tax purposes?

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Interest income from savings 80,000 b. P2,175,000 d. P2,200,000

deposit
Interest income from deposit 125,000 65. Based on the preceding number, how much is the taxable
under FCDS income using OSD?
Royalty income 100,000 a. P3,755,000 c. P3,695,000
b. P5,470,000 d. P3,720,000
How much is the taxable income using itemized deduction?
a. P1,675,000 c. P1,700,000

- END -

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