Article 25p. 25

NATIONAL INTERNAL REVENUE CODE TAXATION, TARIFF and CUSTOMS LAWS

SEC. 37.

Special Provisions Regarding Income and

Deductions

of

Insurance

Companies,

Whether

Domestic or Foreign. -

(A)

Special

Deduction

Allowed

to

Insurance

Companies.

-

In

the

case

of

insurance companies,

whether

domestic

or foreign doing business in the

Philippines, the net additions, if any, required by law to be

made within the year to reserve funds and the sums

other than dividends paid within the year on policy and

annuity contracts may be deducted from their gross

income: Provided, however, That the released reserve be

treated as income for the year of release.

(B) Mutual Insurance Companies. - In the case of mutual

fire

and

mutual

employers'

liability

and

mutual

workmen's compensation and mutual casualty insurance

companies requiring their members to make premium

deposits

to

provide

for

losses

and

expenses,

said

companies shall not return as income any portion of the

premium deposits returned to their policyholders, but

shall return as taxable income all income received by

them from all other sources plus such portion of the

premium deposits as are retained by the companies for

purposes other than the payment of losses and expenses

and reinsurance reserves.

(C)

Mutual

Marine

Insurance Companies. - Mutual

marine insurance companies shall include in their return

of gross income, gross premiums collected and received

by them less amounts paid to policyholders on account of

premiums previously paid by them and interest paid

upon those amounts between the ascertainment and

payment thereof.

(D) Assessment Insurance Companies. - Assessment

insurance companies, whether domestic or foreign, may

deduct from their gross income the actual deposit of

sums

with

the

officers

of

the

Government

of

the

Philippines pursuant to law, as additions to guarantee or

reserve funds.

SEC. 38. Losses from Wash Sales of Stock or Securities.

-

(A) In the case of any loss claimed to have been sustained

from any sale or other disposition of shares of stock or

securities

where

it

appears

that

within

a

period

beginning thirty (30) days before the date of such sale or

disposition and ending thirty (30) days after such date,

the taxpayer has acquired (by purchase or by exchange

upon which the entire amount of gain or loss was

recognized by law), or has entered into a contact or

option so to acquire, substantially identical stock or

securities, then no deduction for the loss shall be allowed

under Section 34 unless the claim is made by a dealer in

stock or securities and with respect to a transaction made

in the ordinary course of the business of such dealer.

(B) If the amount of stock or securities acquired (or

covered by the contract or option to acquire) is less than

the amount of stock or securities sold or otherwise

disposed

of,

then

the

particular

shares of stock or

securities, the loss from the sale or other disposition of

which is not deductible, shall be determined under rules

and regulations prescribed by the Secretary of Finance,

upon recommendation of the Commissioner.

(C) If the amount of stock or securities acquired (or

covered by the contract or option to acquire which) is not

less than the amount of stock or securities sold or

otherwise disposed of, then the particular shares of stock

or securities, the acquisition of which (or the contract or

option to acquire which) resulted in the non-deductibility

of

the

loss

shall

be

determined

under

rules

and

regulations prescribed by the Secretary of Finance, upon

recommendation of the Commissioner.

SEC. 39. Capital Gains and Losses. -

(A) Definitions. - As used in this Title -

(1)

Capital Assets. - The term ' capital assets '

means property held by the taxpayer (whether or

not connected with his trade or business), but does

not include stock in trade of the taxpayer or other

property of a kind which would properly be included

in the inventory of the taxpayer if on hand at the

close of the taxable year or property held by the

taxpayer primarily for sale to customers in the

ordinary course of his trade or business, or property

used in the trade or business, of a character which is

subject to the allowance for depreciation provided in

Subsection (F) of Section 34; or real property used in

trade or business of the taxpayer.

(2)

Net Capital Gain. - The term ' net capital gain '

means

the

excess

of

the

gains

from

sales or

exchanges of capital assets over the losses from

such sales or exchanges.

(3)

Net Capital Loss. - The term ' net capital loss '

means

the

excess

of

the losses from sales or

exchanges of capital assets over the gains from such

sales or exchanges.

(B)

Percentage Taken into Account - In the case of a

taxpayer, other than a corporation, only the following

percentages of the gain or loss recognized upon the sale

or exchange of a capital asset shall be taken into account

in computing net capital gain, net capital loss, and net

income.

(1)

One hundred percent (100%) if the capital asset

has been held for not more than twelve (12) months;

and

(2)

Fifty percent (50%) if the capital asset has been

held for more than twelve (12) months;

(C)

Limitation on Capital losses. - Losses from sales or

exchange capital assets shall be allowed only to the

extent of the gains from such sales or exchanges. If a

bank or trust company incorporated under the laws of

the Philippines, a substantial part of whose business is

the receipt of deposits, sells any bond, debenture, note, or

certificate or other evidence of indebtedness issued by

any corporation (including one issued by a government or

political subdivision thereof), with interest coupons or in

registered form, any loss resulting from such sale shall

not be subject to the foregoing limitation and shall not be

included

in

determining

the

applicability

of

such

limitation to other losses.

(D) Net Capital Loss Carry-Over. - If any taxpayer, other

than a corporation, sustains in any taxable year a net

capital loss, such loss (in an amount not in excess of the

net

income

for

such

year)

shall

be

treated in the

succeeding taxable year as a loss from the sale or

exchange of a capital asset held for not more than twelve

(12) months.

(E)

Retirement of Bonds, Etc. - For purposes of this Title,

amounts received by the holder upon the retirement of

bonds,

debentures,

notes

or

certificates

or

other

evidences of indebtedness issued by any corporation

(including those issued by a government or political

subdivision thereof) with interest coupons or in registered

form,

shall

be

considered

as

amounts

received

in

exchange therefor.

(F)

Gains or losses from Short Sales, Etc. - For purposes

of this Title -

(1)

Gains or losses from short sales of property shall

be considered as gains or losses from sales or

exchanges of capital assets; and

(2)

Gains or losses attributable to the failure to

exercise privileges or options to buy or sell property

shall be considered as capital gains or losses.

SEC. 40. Determination of Amount and Recognition of

Gain or Loss. -

(A) Computation of Gain or Loss. - The gain from the

sale or other disposition of property shall be the excess of

the amount realized therefrom over the basis or adjusted

basis for determining gain, and the loss shall be the

excess of the basis or adjusted basis for determining loss

over the amount realized. The amount realized from the

sale or other disposition of property shall be the sum of

© Compiled by RGL

25 of 201