TUASON V. LINGAD (TAX)

Issue: Whether or not the properties in question which the petitioner had inherited and subsequently sold in small lots to other persons should be regarded as capital assets.

As thus defined by law, CAPITAL ASSETS include all properties of a taxpayer whether or not connected with his trade or business, except:

1. stock in trade or other property included in the taxpayer's inventory;
2. property primarily for sale to customers in the ordinary course of his trade or business;
3. property used in the trade or business of the taxpayer and subject to depreciation allowance; and
4. real property used in trade or business.

If the taxpayer sells or exchanges any of the properties above, any gain or loss relative thereto is an ordinary gain or an ordinary loss; the loss or gain from the sale or exchange of all other properties of the taxpayer is a capital gain or a capital loss.

Under Section 34(b)(2) of the Tax Code, if a gain is realized by a taxpayer (other than a corporation) from the sale or exchange of capital assets held for more than 12 months, only 50% of the net capital gain shall be taken into account in computing the net income.

The Tax Code's provisions on so-called long-term capital gains constitutes a statute of partial exemption. In view of the familiar and settled rule that tax exemptions are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority, it is the taxpayer's burden to bring himself clearly and squarely within the terms of a tax-exempting statutory provision, otherwise, all fair doubts will be resolved against him.

In the case at bar, after a thoroughgoing study of all the circumstances, this Court is of the view and so holds that petitioner's thesis is bereft of merit. Under the circumstances, petitioner's sales of the several lots forming part of his rental business cannot be characterized as other than sales of non-capital assets. the sales concluded on installment basis of the subdivided lots do not deserve a different characterization for tax purposes.

This Court finds no error in the holding that the income of the petitioner from the sales of the lots in question should be considered as ordinary income.

FERRER V. CIR (TAX)

The Tax Court held that the sale of the bakery did not constitute a sale of a single asset but of individual assets, some of which were capital assets while other were ordinary assets. But since petitioner failed to show what portion of the selling price of the bakery was fairly attributable to each asset, the Tax Court held that it could not ascertain the capital and/or ordinary gains taxes properly payable upon he sale of the business. For this reason, it denied petitioner's claim for refund.

We agree with the contention of the respondent that the matter of computation of profit cannot be taken up in this appeal because the same was neither raised in the Tax Court nor made within the issues of the pleadings of the parties. There, the only issues were whether the Tax Court had jurisdiction over the case and whether or not the sale of the bakery was a sale of capital asset or of individual assets comprising the business.

The rule is well settled that no question will be considered by the appellate court which has not been raised in the court below. When a party deliberately adopts a certain theory, and the case is tried and decided upon the theory in the court below, he will not be permitted to change his theory on appeal, cause to permit him to do so would be unfair to the adverse party.

The issue then is whether or not the sale of the La Suiza Bakery was a sale of a capital asset so that the profits derived from the sale is taxable up to 50 percent only, considering that petitioner owned it for more than 12 months, or whether the business is to be comminuted into its component parts, each part to be tested against the definition of capital assets in the Tax Code.

In the face of the language of the law, although it may be true that a stock in trade taken by itself should be treated as a universitas facti, by no possibility can a whole business be so treated and the same is true as to any property within the other exceptions. Congress plainly did not mean to comminute the elements of a business, plainly, it did not regard the whole as capital assets.

In this with this, we hold that the sale of the bakery was a sale not of a single asset but of individual assets that made up the business. And since the petitioner failed to point out what part of the price he had received could be fairly attributed to each asset, the Tax Court correctly denied his claim.

ABELLO V. COMMISSIONER (TAX)

Contribution to campaign funds of political candidates subject to DONOR'S TAX as donation under the Civil Code, as they were made without any consideration or compensation therefor. Petitioners had argued that the consideration for contribution was not liberality but the election to office of a candidate that could redound to their benefit.

COMMISSIONER V. BAIER-NICKEL (TAX)

Source of income is activity that produced the income, not the physical source of the income or its location. Payee may be Filipino, but that alone does not make it Philippine-sourced, if activities/services resulting in the income are actually performed abroad. No contradiction with BOAC case on activity test. BOAC actually followed activity test.

COMMISSIONER V. REYES (TAX)

Under Section 228, an ASSESSMENT must state the facts and the law on which it is based. Otherwise, it is invalid. This is not satisfied when taxpayer is simply informed in writing of the investigation being conducted and the recommendation for the assessment of ESTATE TAX.

In these circumstances, there is denial of due process because taxpayer cannot adequately respond to the assessment. Here, there was lack of basis and insufficiency of the gross figures and details of the itemized deduction indicated in the notice letter. The assessment was based on estimates that appear to have been arbitrarily and capriciously arrived at.

COMMISSIONER V. PHILIPPINE GLOBAL (TAX)

If the PROTEST is not a request for reinvestigation, but only a request for cancellation or reconsideration of the assessment, the filing of the protest does not toll the running of the prescriptive period to collect.

RIZAL COMMERCIAL BANKING V. COMMISSIONER (TAX)

An appeal to the CTA from the inaction of the Commissioner on a protested assessment is optional as the taxpayer can wait for the actual decision before appealing. However, the exercise of one option excludes the other. Thus, if you appeal from the inaction, you can no longer appeal from the actual decision.

COMMISSIONER V. ISABELA CULTURAL CORPORATION (TAX)

Accrual of expense must be made even when the amount cannot be exactly determined, so long as a right to receive already exists and the amount can be estimated.

DIZON V. CTA (TAX)

For purposes of computing the value of the net estate for ESTATE TAX PURPOSES, the value of the liabilities against an estate is to be determined as of the time of death.

Post-death developments effectively reducing the value of these liabilities do not require a reduction of the amount of these liabilities for estate tax purposes.

BPI V. COMMISSIONER (TAX)

A REQUEST FOR REINVESTIGATION which is not granted by the Commissioner does not toll the running of the 3-year period for collection after the assessment is issued.