D.

Losses

- arising from fire, storms, casualties, theft and other losses in connection with trade within the taxable
year without insurance is allowed as deductions

- must submit a declaration of loss not less than 30 or more than 90 days

Casualty loss

- a taxpayer is entitled to claim for properties actually used in the business

- properties must be reported as part of assets
- amount guaranteed by insurance shall not be deductible as loss
- deduction of assets must be properly adjusted in the accounts
- net book value is the basis if for total destruction
- restoration must be recognized as either repair expense or capitalized assets

Net Operating Loss Carry Over

allowed if no change in ownership

- not less than 75% of nominal value outstanding shares

- not less than 75% of paid capital of the corporation

Nominal value outstanding shares – par value of stock issued to the stockholders of the corporation

Loss from shrinkage of stock value - caused by fluctuation of stock market. loss value allowed is the
value the stock is disposed off

Loss from stocks becoming worthless - must have clear and convincing evidence of stocks being
worthless to be allowed as deductions
Loss of useful value – requires proof of unforeseen cause for deductions

Loss from wash sales – deductions allowed if securities transactions are in the ordinary course of
business

Wagering loss – outcome is dependent upon chance

Abandonment loss – notices of abandonment shall be filed to the commissioner

Loss from farming - livestock and other farm losses deductible in the year the loss is incurred

Bad Debts – receivables which collection of through courts is costlier to the tax payer

Tax benefit - Rule recovery of bad debts from the preceding year shall be recorded part of the gross
income in the current year

Depreciation

- Straight line method

- declining balance method
- sum of the years digit method
Agreement to Useful Life and Rate – Tax payer and commissioner agreed in writing on the time of life of
a property.
Depletion - Wasting assets only replaceable by nature

Cost depletion method – a reasonable allowance for depletion computed in accordance to cost
depletion method prescribed by secretary of finance for oil, gas well and mines

Accrediting entity – DSWD, DOST, PSC, NCCA, CHED will certify and accredit charitable organizations as
donee-institutions relative to the deductibility of contrition’s or gifts received by them

Certificate of Donation – donor must notify Revenue District officer every 1M donation

Date and Place of Filing - Claims for limited or full deductibility of donation contributions by the donor at
the time of filing their income tax return

Research and development – Cost of materials used for research that have no alternative uses

Amortization of Certain Research and Development Expenditures

- paid or incurred
- not treated as expenses
- chargeable to capital account

Limitations on deductions

- any expenditures for improvement of land

- any expenditures of ascertaining the existence of a location
Pension Trust – Payment of a reasonable amount to the employee shall be allowed as deductions
Items not deductible

- Personal expenses
- Amount for building or improvements
- amount for restoration
- Premiums paid on life insurance
- Losses from sales or exchange of property between related tax payer.