QUAMTO FOR TAXATION LAW (1991-2015)

7. Other taxes that may be imposed which the BIR rendered outside of the Philippines (Sec. 42, NIRC).
shall collect. However, P is taxable on rental income for the lease of
his Philippine residence because this is an income
Income Taxation derived from within, the leased property being
located in the Philippines (Sec. 42, NIRC).
Features of the Philippine Income Tax Law
Q: Z is a Filipino immigrant living in the United States
Q: What are the basic features of the present income for more than 10 years. He is retired and he came
tax system"? (1996) back to the Philippines as a balikbayan. Every time he
comes to the Philippines, he stays here for about a
A: The Philippine income tax system has the following month. He regularly receives a pension from his
basic features: former employer in the United States, amounting to
1. National tax – It is imposed and collected by the US$1, 000 a month. While in the Philippines, with his
National Government throughout the country. pension pay from his former employer, he purchased
2. General tax – It is levied without specific or three condominium units in Makati which he is
predetermined purpose. Thus, the revenue from renting out for P15,000 a month each. Does the US$1,
income tax may be appropriated for general public 000 pension become taxable because he is now
purposes. residing in the Philippines? Reason briefly. (2007)
3. Excise tax – It is imposed on the right or privilege of
a person to receive or earn income. A: No, the US$1,000 pension is excluded from gross
4. Direct tax – It is payable by the person upon whom it income because it is received by a Filipino resident or
is directly imposed by law. non-resident from a foreign private institution which
5. Progressive tax – It is based upon one’s ability to pay. under Sec. 32(B)(6) of the NIRC is excluded from gross
6. A comprehensive system – It adopts the citizen income.
principle, the residence principle, and the source
principle. Alternative Answer:
7. Semi-global or semi-schedular system – Some types No, the US$1,000 pension is excluded from gross income
of taxable income are compounded or grouped because it is derived from sources outside of the
together without distinction, and after effecting Philippines by a non-resident citizen. He may only be
allowable deductions, are then subjected to taxed for income from sources within the Philippines
graduated tax rates. This is known as the global tax (Sec. 42[A][3] in relation to Sec. 23, NIRC).
system.
Q: Is his purchase of the three condominium units
Other types of income are classified into different subject to any tax? Reason briefly.
categories and are accorded different tax treatments.
Each category of income has its own schedule of tax rates. Yes, the purchase of the 3 condominium units is subject
This is known as the scheduler tax system. to:
1. Documentary stamp tax (payable by either seller or
Kinds of Taxpayers purchaser) (Sec. 196, NIRC);
2. Local transfer tax imposed under the Local
Individuals Government Code (Sec. 134, LGC);
3. Value added tax, if Z purchased the units from real
Non-Resident Citizen estate developers and/or real estate lessors; and
4. Income tax, either capital gains tax or regular income
Q: A Co., a Philippine corporation, has an executive tax, depending on whether the condominium is
(P) who is a Filipino citizen. A Co. has a subsidiary in regarded as a capital asset or an ordinary asset of the
Hong Kong (HK Co.) and will assign P for an indefinite seller
period to work full time for HK Co. P will bring his
family to reside in HK and will lease out his residence Q: Will Z be liable to pay income tax on the P45,000
in the Philippines. The salary of P will be shouldered monthly income? Reason briefly.
50% by A Co. while the other 50% plus housing, cost
of living and educational allowances of P's A: Yes, Z shall be liable to pay income tax since he is now
dependents will be shouldered by HK Co. A Co. will a taxpayer engaged in the business of leasing real
credit the 50% of P's salary to P's Philippine bank property. The rental income from Makati condominium
account. P will sign the contract of employment in the units is earned within the Philippines and being a non-
Philippines. P will also be receiving rental income for resident citizen who is taxable only on income earned
the lease of his Philippine residence. Are these within the Philippines, such income is subject to income
salaries, allowances and rentals subject to the tax.
Philippine income tax? (1999)
Q: Mr. Sebastian is a Filipino seaman employed by
A: The salaries and allowances received by P are not a Norwegian company which is engaged exclusively
subject to Philippine income tax. P qualifies as a in international shipping. He and his wife, who
nonresident citizen because he leaves the Philippines manages their business, filed a joint income tax
for employment requiring him to be physically present return for 1997 on March 15, 1998. After an audit of
abroad most of the time during the taxable year (Sec. the return, the BIR issued on April 20, 2001 a
22(E), NIRC). A non-resident citizen is taxable only on deficiency income tax assessment for the sum of
income derived from Philippine sources (Sec. 23, P250,000.00, inclusive of interest and penalty. For
NIRC). The salaries and allowances received from failure of Mr. and Mrs. Sebastian to pay the tax within
being employed abroad are incomes from without the period stated in the notice of assessment, the BIR
because these are compensation for services issued on August 19, 2001 warrants of distraint and
9

UNIVERSITY OF SANTO TOMAS TEAM BAROPS

FACULTY OF CIVIL LAW ACADEMICS COMMITTEE 2016
 QuAMTO for TAXATION LAW (1991-2015)
levy to enforce collection of the tax. What is the rule
of income taxation with respect to Mr. Sebastian's Corporations
income in 1997 as a seaman on board the Norwegian
vessel engaged in international shipping? Explain Q: For failure to comply with certain corporate
your answer. (2002) requirements, the stockholders of ABC Corp. were
notified by the Securities and Exchange Commission
A: Mr. Sebastian’s income as seaman on board the that the corporation would be subject to involuntary
Norwegian vessel engaged in international shipping shall dissolution. The stockholders did not do anything to
not be subjected to income tax. comply with the requirements, and the corporation
was dissolved. Can the stockholders be held
An individual citizen of the Philippines who is working personally liable for the unpaid taxes of the dissolved
and deriving income from abroad as an overseas corporation? Explain briefly. (2004)
contract worker is taxable only on income derived
from sources within the Philippines: Provided, That a A: No. As a general rule, stockholders cannot be held
seaman who is a citizen of the Philippines and who personally liable for the unpaid taxes of a dissolved
receives compensation for services rendered abroad corporation. The rule prevailing under our jurisdiction is
as a member of the complement of a vessel engaged that a corporation is vested by law with a personality that
exclusively in international trade shall be treated as is separate and distinct from those of the persons
an overseas contract worker (Sec. 23(C), NIRC). composing it (Sunio v. NLRC, 127 SCRA 390 [1984]).

Mr. Sebastian shall be considered as an overseas contract NOTE: Additional point should be given to the examinee if
worker. His income as seaman, which is an income from he answers in the following that: However, stockholders
without the Philippines, shall not be liable for income tax may be held liable for the unpaid taxes of a dissolved
in the Philippines. corporation if it appears that the corporate assets have
passed into their hands (Tan Tiong Bio v. CFR, 4 SCRA 986
Non-resident aliens engaged in trade or business [1962]). Likewise, when stockholders have unpaid
subscriptions to the capital of the corporation they can be
Q: Mr. Cortez is a non-resident alien based in Hong made liable for unpaid taxes of the corporation to the
Kong. During the calendar year 1999, he came to the extent of their unpaid subscriptions.
Philippines several times and stayed in the country
for an aggregated period of more than 180 days. How Q: Weber Realty Company which owns a three-
will Mr. Cortez be taxed on his income derived from hectare land in Antipolo entered into a Joint Venture
sources within the Philippines and from abroad? Agreement (JVA) with Prime Development Company
(2000) for the development of said parcel of land. Weber
Realty as owner of the land contributed the land to
A: Mr. Cortez being a non-resident alien individual who the Joint Venture and Prime Development agreed to
has stayed for an aggregated period of more than 180 develop the same into a residential subdivision and
days during the calendar year 1999, shall for that taxable construct residential houses thereon. They agreed
year be deemed to be a non-resident alien doing business that they would divide the lots between them. (2007)
in the Philippines. Considering the above, Mr. Cortez shall
be subject to an income tax in the same manner as an Does the JVA entered into by and between Weber and
individual citizen and a resident alien individual, on Prime create a separate taxable entity? Explain
taxable income received from all sources within the briefly.
Philippines (Sec. 25 (A) (1), NIRC). Thus, he is allowed to
avail of the itemized deductions including the personal A: No, since the arrangement between Weber Realty Co.
and additional exemptions but subject to the rule on and Prime Development Co. is for the purpose of
reciprocity on the personal exemptions (Sec. 34 (A) to (J) undertaking a construction project, there is no separate
and (M) in relation to Sec. 25 (A) (1), Ibid, Sec. 35 (D), taxable entity pursuant to Sec. 22[B] of the NIRC.
NIRC). The term 'corporation' shall include partnerships, no
matter how created or organized, joint-stock companies,
Non-resident aliens not engaged in trade or business joint accounts (cuentas en participacion), association, or
insurance companies, but does not include general
Q: Is a non-resident alien who is not engaged in trade professional partnerships and a joint venture or
or business or in the exercise of profession in the consortium formed for the purpose of undertaking
Philippines but who derived rental income from construction projects or engaging in petroleum, coal,
the Philippines required to file an income tax return geothermal and other energy operations pursuant to an
on April of the year following his receipt of said operating consortium agreement under a service
income? If not, why not? Explain your answer. (2001) contract with the Government (Sec. 22[B], NIRC).

A: No. The income tax on all income derived from Nonresident Foreign Corporations
Philippine sources by a non-resident alien who is not
engaged in trade or business in the Philippines is Q: Foster Corporation (FC) is a Singapore-based
withheld by the lessee as a Final Withholding Tax foreign corporation engaged in construction and
(Sec. 57(A), NIRC). The government cannot require installation projects. In 2010, Global Oil Corporation
persons outside of its territorial jurisdiction to file a (GOC), a domestic corporation engaged in the
return; for this reason, the income tax on income refinery of petroleum products, awarded an anti-
derived from within must be collected through the pollution project to Foster Corporation, whereby FC
withholding tax system and thus relieve the recipient of shall design, supply machinery and equipment, and
the income the duty to file income tax returns (Sec. 51, install an anti-pollution device for GOC’s refinery in
10

NIRC). the Philippines, provided that the installation part of

*QUAMTO is a compilation of past bar questions with answers as suggested by UPLC and other distinct
luminaries in the academe, and updated by the UST Academics Committee to fit for the 2016 Bar Exams.
 QUAMTO FOR TAXATION LAW (1991-2015)

the project may be sub-contracted to a local the trust instrument Santino, Johnny's 10-year old
construction company. Pursuant to the contract, the son, as the sole beneficiary. The trustee is instructed
design and supply contracts were done in Singapore to distribute the yearly rentals amounting to
by FC, while the installation works were sub- 720,000.00. The trustee consults you if she has to pay
contracted by the FC with the Philippine Construction the annual income tax on the rentals received from
Corporation (PCC), a domestic corporation. The the commercial apartment.
project with a total cost of P100 Million was
completed in 2011 at the following cost components: a. What advice will you give the trustee? Explain.
(design – P20Million; machinery and equipment – b. Will your advice be the same if the trustee is
P50 Million; and installation –P30 Million). Assume directed to accumulate the rental income and
that the project was 40% complete in 2010 and 100% distribute the same only when the beneficiary
complete in 2011, based on the certificates issued by reaches the age of majority? Why or why not?
the certificates issued by the architects and (2009)
engineers working on the project. GOC paid FC as A:
follows: P60 Million in 2010 and P40 Million in 2011, a. I will advise the trustee that she has nothing to pay in
and FC paid PCC in foreign currency through a annual income taxes because the trust’s taxable
Philippine bank as follows: P10 Million in 2010 and income is zero. This is so because the amount of
P20 Million in 2011. income to be distributed annually to the beneficiary
is a deduction from the gross income of the trust
Is FC liable to Philippines income tax, and if so, how which must be reported as income of the beneficiary
much revenue shall be reported by it in 2010 and in (Sec. 61[A] NIRC).
2011? Explain your answer. b. No. the trustee has to pay the income tax on the
trust’s net income determined annually if the income
A: NO. FC is not liable to Philippine income tax. The is required to be accumulated. Once a taxable trust is
revenues from the design and supply contracts established, its net income is either taxable to the
having been all done in Singapore are income from trust, represented by the trustee, or to the
without, hence, not taxable to a foreign corporation beneficiary depending on the provision for
in the Philippines (Sec. 42, NIRC; CIR v. Marubeni distribution of income following the one-layer
Corporation G.R. No. 137377, December 18, 2001). Also, taxation scheme (Sec. 61[A] NIRC).
with respect to the installation of the project which are
services performed within, the same is sub-contracted to Income
PCC, a domestic corporation. Since FC has no branch or
permanent establishment in the Philippines, business Q: Weber Realty Company which owns a three-
profits earned by it pursuant to our treaty with Singapore hectare land in Antipolo entered into a Joint Venture
are exempt from income tax. Agreement (JVA) with Prime Development Company
for the development of said parcel of land. Weber
Note: If the examinee answered that the offshore portion of Realty as owner of the land contributed the land to
the contract (design and supply) is not taxable in the the Joint Venture and Prime Development agreed to
Philippines while the onshore portion (installation) is develop the same into a residential subdivision and
taxable invoking the source rules, it should be given full construct residential houses thereon. They agreed
credit. The question might be too technical for students and that they would divide the lots between them. (2007)
expected new entrants to tax practice to discern.
a.) Are the allocation and distribution of the saleable
Partnerships lots to Weber and prime subject to income tax and to
expanded withholding tax? Explain briefly.
Q: Noel Langit and his brother, Jovy, bought a parcel A: No, the allocation of saleable lots to Weber and Prime
of land which they registered in their names as pro- is not subject to income tax and the expanded
indiviso owners (Parcel A). Subsequently, they withholding tax. There is no income realized in the
formed a partnership, duly registered with distribution of property, but merely a return of capital.
Securities and Exchange Commission, which bought
another parcel of land (Parcel B). Both parcels of land b. Is the sale by Weber or Prime of their respective
were sold, realizing a net profit of P1,000,000.00 for shares in the saleable lots to third parties subject to
parcel A and P500.000.00 for parcel B. The BIR also income tax and to expanded withholding tax? Explain
claims that the sale of parcel B should be taxed as a briefly.
sale by a corporation. Is the BIR correct? (1994)
A: Yes, the sale by Weber and Prime of their respective
A: The BIR is correct, since a "corporation" as defined the shares results in the realization of income subject to
Tax Code includes partnerships, no matter how created income tax and expanded withholding tax.
or organized, except general professional partnerships.
The business partnership, in the instant case, shall Q: Three brothers inherited in 1992 a parcel of land
therefore be taxed in the same manner as a corporation valued for real estate tax purposes at P3.0 million
on the sale of parcel B. The sale shall thus be subject to which they held in co-ownership. In 1995, they
the creditable withholding tax on the sale of parcel B, and transferred the property to a newly organized
the partnership shall report the gain realized from the corporation as their equity which was placed at the
sale when it files its income tax return. zonal value of P6.0 million. In exchange for the
property, the three brothers thus each received
Trust shares of stock of the corporation with a total par
value of P2.0 million or, altogether, a total of P6.0
Q: Johnny transferred a valuable 10-door commercial million. No business was done by the Corporation,
11

apartment to a designated trustee, Miriam, naming in and the property remained idle. In the early part of

UNIVERSITY OF SANTO TOMAS TEAM BAROPS

FACULTY OF CIVIL LAW ACADEMICS COMMITTEE 2016
 QuAMTO for TAXATION LAW (1991-2015)
1997, one of the brothers, who was in dire need of Q: Congress enacts a law imposing a 5% tax on gross
funds, sold his shares to the two brothers for P2.0 receipts of common carriers. The law does not define
million. Is the transaction subject to any internal the term "gross receipts." Express Transport, Inc., a
revenue tax (other than the documentary stamp tax)? bus company plying the Manila-Baguio route, has
(1997) time deposits with ABC Bank. In 2005, Express
Transport earned P1 Million interest, after deducting
A: Yes. The exchange in 1995 is a tax-free exchange so the 20% final withholding tax from its time deposits
that the subsequent sale of one of the brothers of his with the bank. The BIR wants to collect a 5% gross
shares to the other two (2) brothers in 1997 will be receipts tax on the interest income of Express
subject to income tax. This is so because the tax-free Transport without deducting the 20% final
exchange merely deferred the recognition of income withholding tax. Is the BIR correct? Explain. (2006)
on the exchange transaction. The gain subject to income
tax in the sale is measured by the difference between the A: Yes. The term "Gross Receipts" is broad enough to
selling price of the shares (P2 Million) and the basis of the include income constructively received by the taxpayer.
real property in the hands of the transferor at the time of The amount withheld is paid to the government on its
exchange which is the fair market value of his share in the behalf, in satisfaction of withholding taxes. The fact that
real property at the time of inheritance (Sec. 34(b)(2), it did not actually receive the amount does not alter the
NIRC). The net gain from the sale of shares of stock is fact that it is remitted in satisfaction of its tax obligations.
subject to the schedular capital gains tax of 5% for the Since the income withheld is an income owned by
first P100.000 and 10% for the excess thereof (Sec. 2l(d), Express Transport, the same forms part of its gross
NIRC). receipts (CIR v. Solidbank Corp., G.R. No.
148191,November 25, 2003).
Q: What is the "all events test"? Explain briefly.
(2010) ALTERNATIVE ANSWER: No. The term "gross receipts,"
as applied to the business of a common carrier consists of
A: The “all events test” is a test applied in the realization revenues from carriage of goods, cargoes, and
of income and expense by an accrual-basis taxpayer. passengers. It does not comprehend or include interest
income which is properly described as "Other Income."
To warrant the inclusion of the income or expense in the
gross income or deductions during the taxable year, the Situs of Income Taxation
all-events test requires (1) the right to income or
liability be fixed, and (2) the amount of such income Q: Ms. C, a resident citizen, bought ready-to-wear
or liability be determined with reasonable accuracy. goods from Ms. B, a nonresident citizen. (2015)
However, the test does not demand that the amount of
income or liability be known absolutely, only that a 1. If the goods were produced from Ms. B's factory
taxpayer has at his disposal the information necessary to in the Philippines, is Ms. B's income from the sale
compute the amount with reasonable accuracy. The all- to Ms. C taxable in the Philippines? Explain.
events test is satisfied where computation remains 2. If Ms. B is an alien individual and the goods were
uncertain, if its basis is unchangeable; the test is satisfied produced in her factory in China, is Ms. B's
where a computation may be unknown, but is not as income from the sale of the goods to Ms. C taxable
much unknowable, within the taxable year. The amount in the Philippines? Explain.
of liability does not have to be determined exactly; it must
be determined with “reasonable accuracy.” (CIR vs.
Isabela Cultural Corporation, G.R. No. 172231 February 12, A:
2007)
1. Yes, the income of Ms. B from the sale of ready-to-
Q: YYY Corporation engaged the services of the wear goods to Ms. C is taxable. A nonresident citizen
Manananggol Law Firm in 2006 to defend the is taxable only on income derived from sources
corporation's title over a property used in the within the Philippines (Sec. 23 [B]), NIRC). In line
business. For the legal services rendered in 2007, the with the source rule of income taxation, since the
law firm billed the corporation only in 2008. The goods are produced and sold within the Philippines,
corporation duly paid. YYY Corporation claimed this Ms. B’s Philippine sourced income is taxable in the
expense as a deduction from gross income in its 2008 Philippines.
return, because the exact amount of the expense was 2. Yes, but only a proportionate part of the income.
determined only in 2008. Is YYY's claim of deduction Gains, profits and income from the sale of personal
proper? Reasons. (2009) property produced by the taxpayer without and sold
within the Philippines, shall be treated as derived
A: No. the expense is deductible in the year it complies partly from sources within and partly from sources
with the all-events test. The test is considered met of the without the Philippines (Sec. 42[E], NIRC).
liability if fixed, and the amount of such liability is
determined with reasonable accuracy. The liability to pay Note: The problem does not indicate where the sale took
is already fixed in 2007 when the services were rendered, place. The suggested answers in a and b above assume that
and the amount of such liability is determinable with the sale took place in the Philippines.
reasonable accuracy in the same year. Hence, the
deduction should have been claimed in 2007 and not in Classification of Income as to Source
2008 (CIR v Isabela Cultural Corporation, 515 SCRA 556
[2007]). Concept of gross income from whatever source derived

Actual vis-à-vis constructive receipt Q: Mr. Lajojo is a big-time swindler. In one year he
12

was able to earn P1 Million from his swindling

*QUAMTO is a compilation of past bar questions with answers as suggested by UPLC and other distinct
luminaries in the academe, and updated by the UST Academics Committee to fit for the 2016 Bar Exams.
 QUAMTO FOR TAXATION LAW (1991-2015)

activities. When the Commissioner of Internal party on the matter of where the income comes from. (CIR
Revenue discovered his income from swindling, the v. Manning, G.R. No. L-28398, August 6, 1975)
Commissioner assessed him a deficiency income tax
for such income. The lawyer of Mr. Lajojo protested Q: Explain briefly whether the following items are
the assessment on the following grounds: taxable or non-taxable: EXPROPRIATION OF
PROPERTY (2005)
a. The income tax applies only to legal income, not
to illegal income; A: Taxable. Sale exchange or other disposition of
b. Mr. Lajojo's receipts from his swindling did not property to the government of real property is taxable. It
constitute income because he was under includes taking by the government through
obligation to return the amount he had swindled, condemnation proceedings. (Gonzales v. Court of Tax
hence, his receipt from swindling was similar to a Appeals, G.R. No. L-14532, May 26, 1965)
loan, which is not income, because for every peso
borrowed he has a corresponding liability to pay Gross income and taxable income from sources within the
one peso; and Philippines
c. If he has to pay the deficiency income tax
assessment, there will be hardly anything left to Q: KIA sells airplane tickets through PAL, and these
return to the victims of the swindling. tickets are serviced by KIA airplanes outside the
Philippines. The total sales of airline tickets
How will you rule on each of the three grounds for the transacted by PAL for KIA in 1997 amounted to
protest? Explain. (1995, 2005) P2,968,156.00. The Commissioner of Internal
Revenue assessed KIA deficiency income taxes at the
A: rate of 35% on its taxable income, finding that KIA's
a. The contention that the income tax applies to legal airline ticket sales constituted income derived from
income and not to illegal income is not correct. Sec. sources within the Philippines.
32 of NIRC includes within the purview of gross
income all income from whatever source derived. KIA filed a protest on the ground that the
Hence, the illegality of the income will not preclude P2,968,156.00 should be considered as income
the imposition of the income tax thereon. derived exclusively from sources outside the
b. The contention that the receipts from his swindling Philippines since KIA only serviced passengers
did not constitute income because of his obligation to outside Philippine territory. Is the position of KIA
return the amount swindled is likewise not correct. tenable? Reasons. (2009)
When a taxpayer acquires earnings, lawfully or
unlawfully, without the consensual recognition, A: KIA’s position is not tenable. The revenue it derived in
express or implied, of an obligation to repay and 1997 from sales of airplane tickets in the Philippines
without restriction as to their disposition, he has through its agent PAL, is considered as income from
received taxable income, even though it may still within the Philippines, subject to the 35% tax based on its
be claimed that he is not entitled to retain the taxable income (now at 30%). The transacting of
money, and even though he may still be adjudged business in the Philippines through its local sales agent,
to restore its equivalent. To treat the embezzled makes KIA a resident foreign corporation despite the
funds not as taxable income would perpetuate absence of landing right, thus, it is taxable on income
injustice by relieving embezzlers of the duty of derived from within. The source of an income is the
paying income taxes on the money they enrich property, activity or service that produced the income. In
themselves with through embezzlement, while the instant case, it is the sale of tickets in the Philippines
honest people pay their taxes on every conceivable which is the activity that produced the income. KIA’s
type of income. (James vs. U.S.,366 U.S. 213, 1961). income being derived from within, is subject to Philippine
c. The deficiency income tax assessment is a direct tax Income Tax.
imposed on the owner which is an excise on the
privilege to earn an income. It will not necessarily The definition of "gross income" in the Tax Code is broad
be paid out of the same income that was enough to include proceeds from sales of airline tickets in
subjected to the tax. Mr. Lajojo's liability to pay the the Philippines even if no service or airlifting of
tax is based on his having realized a taxable income passenger or cargo by an airline is done by its planes in
from his swindling activities and will not affect his the Philippines. (CIR v British Overseas Airways
obligation to make restitution. Payment of the tax is Corporation, 149 SCRA 395 [1987])
a civil obligation imposed by law while restitution is
a civil liability arising from a crime. Sources of Income Subject to Tax

Q: Explain briefly whether the following items are Compensation Income

taxable or non-taxable: a) Income from JUETENG
(2005) Q: Mr. Quiroz worked as chief accountant of a hospital
for forty-five years. When he retired at 65 he received
A: Taxable. Gross income includes "all income derived retirement pay equivalent to two months' salary for
from whatever source" (Sec. 32[A], NIRC), which was every year of service as provided in the hospital BIR
interpreted as all income not expressly excluded or approved retirement plan. The Board of Directors of
exempted from the class of taxable income, irrespective the hospital felt that the hospital should give Quiroz
of the voluntary or involuntary action of the taxpayer in more than what was provided for in the hospital's
producing the income. Thus, the income may proceed retirement plan in view of his loyalty and invaluable
from a legal or illegal source such as from jueteng. services for forty-five years; hence, it resolved to pay
Unlawful gains, gambling winnings, etc. are subject to him a gratuity of P1 Million over and above his
13

income tax. The tax code stands as an indifferent neutral retirement pay.

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FACULTY OF CIVIL LAW ACADEMICS COMMITTEE 2016