Chapter 13

Generally, in chapter 13 it discusses the concept of business expense, which is used as a deduction to
the gross income of a taxpayer. Moreover, this chapter also differs the differences between the business
expense and personal expense. The former is an expense that came from the doings of trade, business
and practice of profession such as salaries for employees, office utilizes, rent, supplies, taxes, loses, bad
debts and more. While the latter on the other is an expense that arises from the living and family
expenses of an individual taxpayer, such as food expenses for the family of the taxpayer itself, tuition
fees of the dependent and other expenses that arises from personal usage. Furthermore, this chapter
also tackles the various or different accounting procedures that is used to account expenses and the
general principles of deduction of gross income.

Chapter 13 - A

This chapter is about the regular allowable itemized deductions that is under the National Internal
Revenue Code (NIRC). The regular allowable itemized deduction in this chapter are expenses that are
considered to be not directly related to the selling of good and rendering of services. These itemized
deductions are the interest expense, taxes, losses, bad debts, depreciation, depletion, charitable and
other contributions, contributions to pension and trust, research and development costs and other
ordinary, and necessary trade, business, or professional expense.

Chapter 13 – B

This chapter is about the Special Allowable Itemized Deductions and Net Operating Loss Carry – Over
(NOLCO). The former is about the other items of deductions that which or which may not partake to the
nature of expenses, but are allowed by the NIRC or by special laws as deductions. These deductions
include deduction incentives to taxpayers in assisting and complying with certain legal requirements.
While the latte is about or pertains to the amount of net operating loss that is allowable by the law to be
carry over as a deduction against the available net income in the following three years.

Chapter 13 – C

The chapter 13 – C is about the rules of the optional standard deductions (OSD) for individual and
corporate taxpayers. The OSD in this chapter is in in lieu of the itemized deductions including NOLCO
allowable under the NIRC and special laws. And that the allowable deduction of the taxpayer under this
is simply presumed as the percentage of gross sales or receipt for individuals and gross income for
corporations. The OSD has a 40% of its gross income that is allowable as an deduction in lieu of its
itemized deductions.