Article 24p. 24

NATIONAL INTERNAL REVENUE CODE TAXATION, TARIFF and CUSTOMS LAWS

research and development of a character which

is subject to depreciation and depletion; and

(b) Any expenditure paid or incurred for the

purpose of ascertaining the existence, location,

extent, or quality of any deposit of ore or other

mineral, including oil or gas.

(J)

Pension

Trusts.

-

An

employer

establishing

or

maintaining a pension trust to provide for the payment of

reasonable pensions to his employees shall be allowed as

a deduction (in addition to the contributions to such trust

during the taxable year to cover the pension liability

accruing during the year, allowed as a deduction under

Subsection (A)(1) of this Section) a reasonable amount

transferred or paid into such trust during the taxable year

in excess of such contributions, but only if such amount

(1)has not theretofore been allowed as a deduction, and

(2) is apportioned in equal parts over a period of ten (10)

consecutive years beginning with the year in which the

transfer or payment is made.

(K)

Additional

Requirements

for

Deductibility

of

Certain Payments. - Any amount paid or payable which

is otherwise deductible from, or taken into account in

computing gross income or for which depreciation or

amortization may be allowed under this Section, shall be

allowed as a deduction only if it is shown that the tax

required to be deducted and withheld therefrom has

been

paid

to

the

Bureau

of

Internal

Revenue

in

accordance with this Section 58 and 81 of this Code.

(L) Optional Standard Deduction (OSD). - In lieu of the

deductions allowed under the preceding Subsections, an

individual subject to tax under Section 24, other than a

nonresident alien, may elect a standard deduction in an

amount not exceeding forty percent (40%) of his gross

sales or gross receipts, as the case may be. In the case of a

corporation subject to tax under Sections 27(A) and

28(A)(1), it may elect a standard deduction in an amount

not exceeding forty percent (40%) of its gross income as

defined in Section 32 of this Code. Unless the taxpayer

signifies in his return his intention to elect the optional

standard deduction, he shall be considered as having

availed

himself

of

the

deductions

allowed

in

the

preceding Subsections. Such election when made in the

return shall be irrevocable for the taxable year for which

the return is made: Provided, That an individual who is

entitled

to

and

claimed

for

the

optional

standard

deduction shall not be required to submit with his tax

return

such

financial

statements

otherwise required

under

this

Code:

Provided,

further,

That

a

general

professional partnership and the partners comprising

such partnership may avail of the optional standard

deduction only once, either by the general professional

partnership or the partners comprising the partnership:

Provided, finally, That except when the Commissioner

otherwise permits, the said individual shall keep such

records pertaining to his gross sales or gross receipts, or

the said corporation shall keep such records pertaining to

his gross income as defined in Section 32 of this Code

during the taxable year, as may be required by the rules

and regulations promulgated by the Secretary of Finance,

upon recommendation of the Commissioner.

Notwithstanding

the

provisions

of

the

preceding

Subsections

(as amended by RA No 10963)

(M)

Premium

Payments

on

Health

and/or

Hospitalization Insurance of an Individual Taxpayer. -

the amount of premiums not to exceed Two thousand

four hundred pesos (P2,400) per family or Two hundred

pesos (P200) a month paid during the taxable year for

health and/or hospitalization insurance taken by the

taxpayer for himself, including his family, shall be allowed

as a deduction from his gross income: Provided, That said

family has a gross income of not more than Two hundred

fifty thousand pesos (P250,000) for the taxable year:

Provided, finally, That in the case of married taxpayers,

only the spouse claiming the additional exemption for

dependents shall be entitled to this deduction.

Notwithstanding

the

provision

of

the

preceding

Subsections,

The

Secretary

of

Finance,

upon

recommendation of the Commissioner, after a public

hearing shall have been held for this purpose, may

prescribe by rules and regulations, limitations or ceilings

for any of the itemized deductions under Subsections (A)

to (J) of this Section: Provided, That for purposes of

determining such ceilings or limitations, the Secretary of

Finance shall consider the following factors: (1) adequacy

of

the

prescribed

limits

on

the

actual

expenditure

requirements of each particular industry; and (2)effects of

inflation on expenditure levels: Provided, further, That no

ceilings shall further be imposed on items of expense

already subject to ceilings under present law.

SEC.

35.

Allowance

of

Personal

Exemption

for

Individual Taxpayer. - (as amended by RA No 10963)

SEC. 36. Items not Deductible. -

(A) General Rule. - In computing net income, no

deduction shall in any case be allowed in respect to -

(1) Personal, living or family expenses;

(2) Any amount paid out for new buildings or

for permanent improvements, or betterments

made to increase the value of any property or

estate;

This Subsection shall not apply to intangible

drilling

and

development

costs incurred in

petroleum

operations

which are deductible

under Subsection (G) (1) of Section 34 of this

Code.

(3) Any amount expended in restoring property

or in making good the exhaustion thereof for

which an allowance is or has been made; or

(4) Premiums paid on any life insurance policy

covering the life of any officer or employee, or

of any person financially interested in any trade

or

business

carried

on

by

the

taxpayer,

individual or corporate, when the taxpayer is

directly or indirectly a beneficiary under such

policy.

(B) Losses from Sales or Exchanges of Property. -

In computing net income, no deductions shall in any

case be allowed in respect of losses from sales or

exchanges of property directly or indirectly -

(1) Between members of a family. For purposes

of this paragraph, the family of an individual

shall

include

only

his

brothers

and

sisters

(whether by the whole or half-blood), spouse,

ancestors, and lineal descendants; or

(2)

Except

in

the

case

of

distributions

in

liquidation,

between

an

individual

and

corporation more than fifty percent (50%) in

value of the outstanding stock of which is

owned, directly or indirectly, by or for such

individual; or

(3)

Except

in

the

case

of

distributions

in

liquidation, between two corporations more

than

fifty

percent

(50%)

in

value

of

the

outstanding stock of which is owned, directly or

indirectly, by or for the same individual if either

one of such corporations, with respect to the

taxable year of the corporation preceding the

date of the sale of exchange was under the law

applicable to such taxable year, a personal

holding company or a foreign personal holding

company;

(4) Between the grantor and a fiduciary of any

trust; or

(5) Between the fiduciary of and the fiduciary of

a trust and the fiduciary of another trust if the

same person is a grantor with respect to each

trust; or

(6)

Between

a

fiduciary

of

a

trust

and

beneficiary of such trust.

© Compiled by RGL

24 of 201