Persons not 1.

NRFC, NRANETB (taxed

entitled to based on their gross income) 1. Between family members.
claim Siblings, spouse, ancestors, lineal
deductions 2. Those covered under a descendants
special tax scheme 2. Between individual and
corporation. More than 50% of
3. Purely compensation the OS is owned by individual
income earners 3. Between 2 corporations. More
Persons not 1. Pure compensation income than 50% of OS is owned by the
required to earners same individual
file ITR 4. Between Grantor and a fiduciary
2. individual whose sole or any trust
income have been subjected 5. Between F of and the F of a trust
to a FWT && the F of another person
6. Between F of a trust and
3. Minimum wage earner beneficiary of a trust

Requisites for deductibility 3. Taxes

1. Deduction must be incurred in Not allowed as deduction

connection to the taxpayer’s trade,
business or exercise of profession a. Income tax provided under NIRC
(necessary) b. Income tax imposed by authority
2. Deduction must be incurred during the of any foreign country
taxable year (ordinary) c. Estate and donor’s tax
3. Deduction must be supported by
adequate proof (Substantiation Rule) 4. Losses
4. Deduction must be in direct connection
to the DMOC [devt, mgt, operation and Ordinary Incurred in business;
conduct] of the TBP Not compensated by
insurance or other
5. Deduction must be in reasonable
indemnity
amount
Casualty Connected with taxpayer’s
ITEMIZED DEDUCTION business;
Not compensated by
insurance;
1. Expenses Not claimed as deduction for
2. Interest estate tax purposes
NOLCO Net operating loss which had
NB: 5 Positive, 3 Negative req. not been claimed as
- Debt is that of the taxpayer deduction,
- Interest is stipulated in writing
-shall be carried over for the
- Interest is legally due
next 3 consecutive taxable
- Must not be between related taxpayers
years
Related taxpayers -immediately following the
year of such loss
 Deductible in full Partially deductible
-there must be no a. Govt for If the taxpayer is
substantial change in the priority
ownership (same persons activities as Individual – 10% of
held NLT 75% of the nominal determined the taxable income
value of OS) by NEDA
b. Certain Corporation – 5% of
XPN: Mines other than oil foreign the taxable income
and gas wells operating for institutions
10 year – 5 years carry over or
international
NB: 6 entities not allowed to organizations
avail of NOLCO pursuant to
Capital losses. special law
Loss from c. Accredited
sales or NGOs subject
exchange of to conditions
capital assets
Losses from
wash sales of 9. Research and devt
stock or 10. Pension trust
securities
Wagering
Losses
Abandonmen
t Losses

5. Bad debts

Debts due to taxpayer actually ascertained to

be worthless.

6. Depreciation

Requirements:

a. It is reasonable in amount
b. It is for exhaustion, wear and tear of the
property
c. The property is used in trade or
business

7. Depletion

Applicable to wasting assets

8. Charitable and other contributions