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Deductible Business Expenses – Personal Services >>when the amount of the salary of an officer or

employee is paid for a limited period after his death to his


Requisites: widow or heirs, in recognition of the services rendered by
-must be reasonable the individual, such payments may be deducted
-payments must be for service >>salaries paid by employers to employees who are absent
in military, naval or other service of the government, but
who intend to return at the conclusion of such service, are
-any amount not paid as purchase price of services allowable deductions
>>an ostensible salary paid by a corporation may be a
distribution of dividend on stock Travel Expenses
>>an ostensible salary may be in part payment for -include transportation expenses + meal allowances +
property lodging of an employee (here and abroad)
>>if the trip is undertaken for purposes other than
-form or method of fixing compensation business, the transportation expense are personal
>>if contingent compensation is paid pursuant to a free expenses and the meals and lodgings are living expenses
bargain between the employer and individual made before and therefore not deductible
the services are rendered, not influenced by any >>if the trip is solely on business, the reasonable and
consideration on the part of the employer other than that necessary travel expenses, including transportation
of securing a fair and advantageous terms on the services expenses, meals and lodging become business instead of
of the individual, it should be allowed as a deduction even personal expenses
though in the actual working out of the contract, it may
prove to be greater than the amount which would Requisites for Deductibility of Travel Expenses
ordinarily be paid -must be reasonable and necessary
-must be incurred or paid “while away from home”
-reasonableness of compensation -must be paid or incurred in the conduct of trade or
>>reasonable and true compensation is only such amount business
as would ordinarily be paid for like services by like
enterprises in like circumstances. The circumstances to be >>in reference to the term “away from home”, the area
taken into consideration are those existing at the date where the business operates is his “tax home” and
when the contract for services was made, not those traveling expenses on this area is not deductible (manila-
existing at the date when the contract is questioned manila) but only those incurred outside of the area being
operated (manila-cebu)
-treatment of excessive compensation
>>the income tax liability of the recipient in respect of an Proof of Deductibility of Travel Expenses
amount ostensibly paid to him as compensation, but not -the following should be attached in his return a statement
allowed to be deducted as such by the payer, will depend showing:
upon the circumstances of each case. In case of excessive >>the nature of business in which he/it is engaged
payments by corporations, if such payments corresponds >>the number of days the employee was “away from
or bear a close relationship to stockholdings, and are home” during the taxable year on account of business
found to be distribution of earnings or profits, the >>the total amount of travel expenses incident to business
excessive payments will be treated as dividend during the taxable year
>>for income tax purposes, the employer cannot legally >>the total amount of other expenses incident to travel as
claim such bonuses as deductible expenses unless they are a deduction
shown to be reasonable

Bonuses to Employees
-allowable deduction from gross income whern:
>>made in good faith
>>given for personal services actually rendered
>>do not exceed a reasonable compensation for the
services rendered when added to the stipulated salaries,
measured by the amount and quality of services
performed in relation to the business of the particular
taxpayer

Pensions and Compensation for Injuries


-are allowable deductions but limited to the amount not
compensated for by insurance or otherwise: