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GROSS INCOME
1. The item of receipt does not fall within the definition of income for
income tax purposes.
“Income – in its broad sense, means all wealth which flows into the taxpayer
other than as a mere return on capital. It includes the forms of income
specifically described as gains derived from sale or other disposition of
capital assets.”
2. A provision of the Tax Code or special law exempts it from income tax.
Gifts are subject to donor’s tax, whereas bequests and devises are subject to
estate tax (1994 Bar). But the income from such property is taxable. If the
taxpayer inherits securities, the value of such securities does not constitute
income but the dividends and interest paid on such securities are taxable.
Principal paid under a marriage settlement and alimony or allowance based
on separation agreement are considered as gifts.
Disability benefits paid under life insurance are also excluded although the
law refers to accidents and health insurance. (Wong v Wing Non, 18TC 205,
December 18, 1949).
Reason: Payment for such, adds nothing to the individual, for the very
concept which sanctions it, prohibits that it shall include a profit. (see
Lawkins vs. Comm., 6 B.T.A. 1032.) In other words, any damage rendered is
compensatory, being payment for the injuries or sickness sustained. The
statutory exemption extends to amounts received as moral damages for
personal injuries which are non-physical in character like alienation of
affection, defamation or libel, and breach of promise to marry.
Pensions received by retirees from foreign sources (BIR Ruling 72-87, March
12, 1987).
g. Benefits received from the GSIS under R.A. No. 8291 including
retirement guaranty.
7. Miscellaneous Items -
iii. Income from bonds and securities: For sale in the international market
(P.D. No. 81); Issue by EPZA (P.D. No. 66)
vi. Awards given by the Ramon Magsaysay Award Foundation (RMAF) are
exempt from the payment of income tax. (R.A. No. 2062)