BAC 2 CHAPTER 4 AND QUIZ 3

• The tax rule that provides that allowances in kind furnished to the employee for and as a necessary incident to the performance of his duties are not taxable is Convenience of the Employer's Rule
• The principle that "a tax bill must only be applicable and operative after becoming a law" is Prospectivity of Tax Laws
• The total amount of 13th-month pay and other benefits to be exempted from tax is P90,000 or less
• Tax avoidance refers to any act or trick that reduces or totally escapes taxes by any legally permissible means
• Overtime pay refers to premium payment received for working beyond regular hours of work
• Double taxation occurs when the same taxpayer is taxed twice by the same tax jurisdiction for the same thing
• Salary refers to earnings received periodically for regular work other than manual labor
• Passive income is considered passive if the taxpayer merely waits for it to be realized
• Royalty income is a payment or portion of proceeds paid to the owner of a right, such as an oil right or a patent for the use of it, or a portion of the proceeds from the work of an author or composer
• Business means any commercial activity engaged in as a means of livelihood or profit of an individual or group of individuals
• A lump sum payment received by an employee who has served a company for a considerable period of time and has decided to withdraw from work into privacy is Retirement pay
• Commissions are usually a percentage of total sales or on a certain quota of sales volume attained as part of an incentive
• Casual labor includes labor which is occasional, incidental, or irregular
• The doctrine that states that taxes are not subject to set-off or legal compensation because the government and the taxpayer are not mutual creditor and debtor of each other is Set-off taxes
• Separation pay is taxable if voluntarily availed of
• Gross compensation income/compensation income may be paid on the basis of piecework, a percentage of profits, and may be paid hourly, daily, weekly, monthly, and annually
• Profession is primarily any endeavor or work requiring specialized training in the field of learning, art, or science engaged in as a means of livelihood or profit of an individual or group of individuals
• Tax evasion refers to any act or trick that tends to illegally reduce or avoid the payment of tax
• Tax exemption


  Also known as tax holiday, refers to the immunity, privilege, or freedom from being subject to a tax which others are subject to
• Dividend income


  Earnings derived from the distribution made by a corporation out of its earnings or profits and payable to its stockholders, whether in money or in other property
• Taxation


  The main purpose of this inherent power is for the support of the government
• Shifting


  The process of transferring the tax burden to other taxpayers
• Tips and gratuities


  Payments made directly to an employee (by a customer of the employer) which are not accounted for by the employee to the employer and are normally considered as taxable income
• Rental income


  Earnings derived from leasing real estate as well as personal property
• Eminent domain


  An inherent power in which the person affected is the owner of the property
• Transformation


  The elimination of wastes or losses by the taxpayer to form savings to compensate for tax imposition or increase in taxes
• Pensions


  A stated allowance paid regularly to a person on his retirement or to his dependents on his death, in consideration of past services, meritorious work, age, loss, or injury
• Wages


  Earnings received usually according to specified intervals of work, as by the hour, day, or week
• Legislative branch


  The law-making body of the government
• Gains from dealings in property


  Income derived from the sale and/or exchange of assets, resulting in gain due to the excess of the amount or value received by the taxpayer over the determined value of the property disposed of
• Interest income


  Earnings derived from depositing or lending money, goods, or credits
• Passive income is considered when the taxpayer merely waits for it to be realized
• Tax condonation


  A forgiveness of the tax obligations of a certain taxpayer under certain justifiable grounds
• Payments given in recognition for services performed

  • Honoraria
• Hazard or emergency pay


  An additional payment received due to workers' exposure to danger or harm while working
• Fringe benefit defines as “any good, service, or other benefit furnished orgranted by an employer, in cash or in kind, in addition to basic salaries of an individual employee.
• De minimis benefits are privileges of relatively small value as given by the employer to his employees.
• Profit sharing It is the proportionate share in the profits of the business received by the employee in addition to his wages.
• Beneficial payments such as where an employer pays the income tax owed by an employee are additional compensation income.
• Awards for special services

  The amount received as an award for special services of employee, or

  suggestions to employer resulting in the prevention of theft or robbery.