Publishing Section 30(d) of the National Internal Revenue Code of 1977

August 4, 1977 REVENUE MEMORANDUM CIRCULAR NO. 36-77 SUBJECT : Publishing Section 30(d) of the National Internal Revenue Code of 1977 TO : All Internal Revenue Officers and others concerned For the information and guidance of all concerned, there is quoted below, Section 30(d) of the National Internal Revenue Code of 1977 as promulgated under Presidential Decree No. 1158. "SEC. 30 Deductions from gross income . In computing net income there shall be allowed as deduction xxx xxx xxx xxx xxx xxx "(d) Losses :" "(1) By individuals . In the case of an individual, losses actually sustained during the taxable year and not compensated for by insurance or otherwise. "(A) If incurred in trade or business; or "(B) If incurred in any transaction entered into for profit, though not connected with the trade or business; or "(C) Of property not connected with the trade or business, if the loss arises from fires, storms, or other casualty, or from robbery, theft or embezzlement. No loss shall be allowed as a deduction under this paragraph if at the time of the filing of the return such loss has been claimed as a deduction for estate tax purposes in the estate tax return. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, is hereby authorized to promulgate rules and regulations prescribing among other things the time and manner by which the taxpayer shall submit a declaration of loss sustained from casualty or from robbery, theft, or embezzlement during the taxable year, Provided, however , That the time limit to be so prescribed in the regulations shall not be less than 30 days nor more than 90 days from the date of the occurrence of the casualty or robbery, theft or embezzlement giving rise to the loss. "(2) By corporations . In the case of a corporation, all losses actually sustained and charged off within the taxable year and not compensated for by insurance or otherwise. "(3) By nonresident aliens or foreign corporations . In the case of a nonresident alien individual or a foreign corporation, the losses deductible are those actually sustained during the year incurred in business or trade conducted within the Philippines, and losses of property within the Philippines arising from fires, storms, or other casualty, and from robbery, theft, or embezzlement, and losses actually sustained during the year in transactions entered into for profit in the Philippines although not connected with their business or trade, when such losses are not compensated for by insurance or otherwise. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, is hereby authorized to promulgate rules and regulations prescribing among other things the time and manner by which the taxpayer shall submit a declaration of loss sustained from casualty or from robbery, theft or embezzlement during the taxable year, Provided, however , That the time to be so prescribed in the regulations, shall not be less than 30 days nor more than 90 days from the date of the occurrence of the casualty or robbery, theft or embezzlement giving rise to the loss." "(4) Capital losses . xxx xxx xxx" FEATURES OF THE AMENDMENT Before the amendment of the aforequoted section, losses arising from fires, storms, or other casualty, or from robbery, theft or embezzlement are reported by the taxpayer only upon filing of income tax returns. Since returns are filed in a year subsequent to the year in which the loss was sustained, and audit of returns are made much later after the date of filing of the return, it is virtually impossible for a taxpayer to substantiate such claim with evidence which no longer exists at the time the return is audited. In order to encourage, if not to compel the taxpayer to compile proof of his alleged loss, the amendment requires him to file a declaration of loss within a period which is reasonably proximate to the date of occurrence of the casualty or event which caused the loss. Under the law, the taxpayer must file the declaration of loss within a period not less than 30 days nor more than 90 days from the occurrence of the casualty, robbery, theft or embezzlement. EFFECTIVITY Although PD 1158 provides that the Tax Code of 1977 took effect on June 3, 1977, the requirements of compliance will be made effective upon approval of the implementing regulations to be promulgated by the Secretary of Finance. ENFORCEMENT All internal revenue officers and others concerned are hereby enjoined to give this circular as wide a publicity as possible. aisa dc EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8