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  • 10-Snippets1 of A Dreamer's Life - TAXATION CASE DIGESTS

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    Jason BUENA
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    This case discusses whether interest paid for the late payment of taxes is deductible from gross income. The court held that interest is deductible if the payment is for a legitimate indebtedness. A tax can be considered an indebtedness even if not strictly a debt. Where a statute imposes personal liability for a tax, the tax becomes a debt in a broad sense. Therefore, the interest the respondent paid for late payment of donor's tax was deductible as interest rather than tax. In conclusion, while interest for delinquent taxes is not deductible as a tax payment, the taxpayer is not precluded from claiming the payment as a deductible interest expense.

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    10-Snippets1 of a Dreamer's Life_ TAXATION CASE DIGESTS

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    This case discusses whether interest paid for the late payment of taxes is deductible from gross income. The court held that interest is deductible if the payment is for a legitimate indebtedness. A tax can be considered an indebtedness even if not strictly a debt. Where a statute imposes personal liability for a tax, the tax becomes a debt in a broad sense. Therefore, the interest the respondent paid for late payment of donor's tax was deductible as interest rather than tax. In conclusion, while interest for delinquent taxes is not deductible as a tax payment, the taxpayer is not precluded from claiming the payment as a deductible interest expense.

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    © All Rights Reserved
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    11 views2 pages

    10-Snippets1 of A Dreamer's Life - TAXATION CASE DIGESTS

    Uploaded by

    Jason BUENA
    This case discusses whether interest paid for the late payment of taxes is deductible from gross income. The court held that interest is deductible if the payment is for a legitimate indebtedness. A tax can be considered an indebtedness even if not strictly a debt. Where a statute imposes personal liability for a tax, the tax becomes a debt in a broad sense. Therefore, the interest the respondent paid for late payment of donor's tax was deductible as interest rather than tax. In conclusion, while interest for delinquent taxes is not deductible as a tax payment, the taxpayer is not precluded from claiming the payment as a deductible interest expense.

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    Snippets of a Dreamer's Life

    Martes, Setyembre 15, 2015

    TAXATION CASE DIGESTS

    DEDUCTIONS FROM GROSS INCOME

    A. INTEREST
    CASE: THE COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. CONSUELO L. VDA.
    DE PRIETO, respondent. G.R. No. L-13912 September 30, 1960

    FACTS:

    Respondent Vda. de Prieto conveyed by way of gifts a real property to her children. The Commissioner of Internal Revenue appraised the property donated at P1,231,268.00, and

    assessed the total sum of P117,706.50 as donor's gift tax, interest and compromises due thereon. Of the total sum of P117,706.50 paid by respondent on April 29, 1954, the sum of P55,978.65

    represents the total interest on account of deliquency. Said sum was claimed as deduction, among others, by respondent in her 1954 income tax return. Petitioner disallowed the claim and as a

    consequence of such disallowance assessed respondent for 1954 deficiency income tax due on the aforesaid P55,978.65, including interest 1957, surcharge and compromise for the late

    payment.

    ISSUE:

    Whether or not interest paid for the late payment of tax is deductible from gross income.

    HELD:

    YES. For interest to be deductible, it must be shown that: (1) there be an indebtedness, (2) there
    should be interest upon it, and (3) what is claimed as an interest deduction should have been paid or accrued
    within the year. In this case, the last two requirements are undisputed. The only question is if interest on
    account of late payments of taxes be considered as indebtedness. Indebtedness has been defined as an
    unconditional and legally enforceable obligation for the payment of money. Within the meaning of that
    definition, it is apparent that a tax may be considered indebtedness. Although taxes already due have not,
    strictly speaking, the same concept as debts, they are, however, obligations that may be considered as such.
    Where statute imposes a personal liability for a tax, the tax becomes, at least in a board sense, a debt. It
    follows that the interest paid by herein respondent for the late payment of her donor's tax is deductible from
    her gross income.
    In conclusion, interest payment for delinquent taxes is not deductible as tax but the taxpayer is not
    precluded thereby from claiming said payment as deduction on account of interest.

    Cessy Dee sa 7:50 PM

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