knowledgeable

2. Normally, taxpayers will have the ability to pay tax when
their income materializes in an exchange transaction since
tax is generally payable in money.
This does not mean, however, that only income realized in
cash is subject to tax. Income realized in non-cash properties
are, in effect, received in cash but the taxpayer used the
same to acquire the non-cash property. Income received in
non- cash considerations is taxable at the fair value of the
property received. Moreover, exempting income realized in
non-cash considerations would open a wide avenue for tax
evasion since taxpayers can easily divert their income in the
form of non- cash consideration.

4. 1. ACTUAL RECEIPT
-Actual receipt involves actual physical taking
of the income in the form of cash or property.
2. CONSTRUCTIVE RECEIPT
-Constructive receipt involves no actual
physical taking of the income but the taxpayer
is effectively benefited.

5. The inflow of wealth to a person that does not increase his
net worth is not income due to the total absence of benefit.
Examples:
a. Receipt of property in trust
b. Borrowing of money under an obligation to return
In law, the proceeds of embezzlement or swindling where
money is taken without an original intention to return are
considered as income because of the increase in net worth
of the swindler.

6. An item of gross income is not exempted by the
Constitution, law, contracts or treaties from
taxation.
The following items of income are exempted by law
from taxation; hence, they are not considered items
of gross income:
1. Income of qualified employee trust fund
2. Revenues of non-profit, non-stock educational
institutions
3. SSS, GSIS, Pag-IBIG, or PhilHealth benefits

7. 4. Salaries and wages of minimum wage earners and
qualified senior citizen
5. Regular income of Barangay Micro-business
Enterprises (BMBEs)
6. Income of foreign governments and foreign
government-owned and controlled corporations
7. Income of international missions and organizations
with income tax immunity