CTA Case No. 273 (Decision)

PPII\~ Al'J>EALS t l ... � 273 \~~ \u) t. X w � � � � � � � � � � � � � X~ ... tlt1 ���rle olf!on . t1 peal to set asW. t 1 � n � of � J ,. t/1, 616. e X entofore a � r nt f id p �� ull. satlSf � t1t1 ner ar . .ld n 0 ~ 1�. c 1 ~ , Call fo A t f J.n�� an In ter d lvertltv. . .. ��� 1 11 � ~~~. t � tltlo .,. ol. II, . died on to Z' 29, 942 � � 1' let 11 p1n �� � ��t�t�� ate proce Jn � 't ��ttl� he � t lt ?41 33 2

- o. 273 . - 3- 1n�� . d teno o h r . per on 1 s 11 as . 1nte eat�. the D�l n opert 1 sol to B nj 1n J ndot}1 for &c t f 1661124. on J u , 23, 19 � ~ , p. 46 , r �� Vol. l) . Th e � an 3,� nt 1n t h 1 f th lot (Exhl 46-48, r � , Vol. ) � �( b d 2) �l � c nse e t lost u of ~. 03�� 9, t en 1 ttti c t of t p pert t tprc frwbc t �� .sold. la1t1on cost s rr1ved at !hg_to t nt of .oo. val of and ln rJ.� tance tax rpoaea, the uncollected r ntal p 0�

:; � 27 pertv e fr - 4r ount of 1, 14 .00 � the u. � x � 1n t an � ap ov d ela 1 a;a1nst t he est t a of pet1� tion '� pare a t .e au of 89, 264. � r.titi n r p1c1te1nc taxes r flee t 1n t he t x r turns . After tnvest1 at1on , re p n nt. es�� ..sed a1nst t e pe t1~1oner eflci ncv 1n o t axea � f th t X 1 question {1948, 1949 ) t ,e r spect1 & of 1. � 71. � d 169.616.50, plu t . at tutorv pen the on ci e~t to d lln en~ � d tnlatrativo penal v fo pet1t l oner�s failure to pa on t real eat t aler' f1 � p. rec ., Vol. I) . h1 a seas ent nd r r turn �������� x ns �������� ������������������ x due t� re �� �� ������ assessed ������ .. 1 d fie C inCO t X � ���� ������ 81.56 et. inc as per return ����� ��� , 7 2.7 nterta nt d � ' ( 1) leal expen ea ������ ( 2) t lons 1n exc of llowe r investl exe t1 �������� ������������������ 335

c. r�� E o. 273 - �lr� . , � t x du ttereon �� ��������� 789. 76 unt sesa 717 , n~ paid ������������������ 71 . 0 D f!ci nc�r 1nco tax ������������ t i.ne �� � � � � ��� 1 . 682. 104, . 51 A s (l c. ro L ������������������� t1 r , .- 0 lin fo 0 0 � ) . 'II 0 � nt 0 1n Ue ou � 336 33 .

� 27:) - 7 .. ti n � curr t1oner�s r Del ther t o~ r t t e or not pe s rcha.r e s u ent for the tax t e trst 1 u s to th r or not ti� t1oner �a eau or eaus t!f t on e ici nc ~ ~eo t X8 f ~ th pa nt nd 1 9 v o t d " reas n f n 1ng thi p res nd nt t at t. f 1lur of th tlti r to fi:l a cla r u of h p d, n s a d h r cause or c u of 1th , to ese t 0 it t .re in no or 1 rel d t r tot t r ains to d d. � do ot 41 r 1~ l .r nt on hi e dings. cor � It 1 r th t in ordin ru civil eatlaf ac ti~n o j d , nt. fo elose n pp 1 t r - fr � ic 1 pr c din s 1nvc1v1ng t x c pee l i 1 ff r .r.y' ,nd 1 tin u1 bl fr or 1n r J c1v11 oce din � Ih etl~n ..or p - nt �of n sess 0 t reel t t xp r cutin an ap al f o the ases nt . ctlo ll t 11c ct o. 1125 pr vi h t �no PP k n. ourt of Tax p � ls x x x s 1 s n th :x x 'X or t rl 0 t � 0. r the o t� of \ \ 33

,.... c .. � T� � � '21 taxp er to p .. a - in no .. - the tax and ~hou1d pa,~ nt e a:Jc ild on in th 1: Gtant cas , t~ sa. 9 lloul e tho taxpa rer of his r .. dv. under ... pu 11c. Act. � 112... nd lthou h tt t xp er had volun� �t J.lv p id th t J.t did n t of its lf t r.in t the pz-oc t. c jur1'>d1ct1on of th a urt ov .r - t d f� -t. r th h t . p v r , .. I 1v --- c 1 n 6 of th Tax ~o ~, satisfv or p <i u .h Cl C~H1. S i$ nt iLS f ~ h " p 1 � ... If a t v th 5 ! on t usly '> k r un of h t � h lr� t. 1 lit� llv co te t nt , ll 6 � r o :t- 0 h .. c-t t nc1ng th liti- G nt nd an .11 t c1 nc � .1th ut p eju 1C tc t f~n 1 ou c .., for refund a: !red T net e!.: n c 1n int n vi n nc, o t 1. I vi . n th n d , th ~ l l l ev nc of: . lt plicJ.tv of - t r fo 11 u s ent tit! n for t un r cti r x c .J v n u1 d nc , c axes for 1948 d 9 h no t1t1on r �a or c u s o cti n n re c 0 ' all n ter 1n r st of h o 1.nto tl rita of he c o. 339

-" CI lal - C. T�� CASE 0. 273 ... 9 - The fir.t qu ation is whether o not the travel- ing expense of 1, 8. 00 incurred y petitioner in her trip to t Philippines in 1948 may be deducted f h�r .rota inco � Trevelin ex-r>.-tses ar deductibl fr groat nco en incurred ile in the pursuit of a tra" or business� ( (l) of the T�x Code). ~Conaiderin that r v !ng ex- penaee are c1aaaif1 un e~ the broa term o � n es� for which a deduction y e c ai , th e ndi 1 ns uat thus be aatisfi r� a trav 1 ex nae uction ust .., be all...d , to wit � (1) the tr-.elin expense t d nece�aary travelin � nse; (2) the the e enae -- i ncu r d w 11 away fr bo - nd (3) at incurred in the p ra 1 of businesaJ (C r v. Plowers, 32 U� � L. � candi- 3, 7). ur to sa i&fy y ne tiona d str y the tr veling � ens de uc i (Id. 32 u. s. at 47 , 9 � d. at 20 ). Have all t �� e ndi- t1o a b en ti i d? in rily, a taxp e � is ho in th sa locality whe e �� hl aineaa. lf aintains is b me in a p ce other t an lace i busi- sue ness, he d so fo conven:umce. ease, he is not all ed uc:t travelin s� fr his pl ce f rea d is ol ce of busine s �n back, for t r aaon t t ex ena s � t e t rath r then s perscn 1, 1iv n % a ly ld h bt.tsiness ex n � � ho lnt ined his p~acticing l in -* Y rk C1 y . 310

CISl � C. T. A. CAS! � 273 - 10 .. residence in � dit ant part of N Y, rk t te . wa& , not all ed deduction of his r veling e � a cov _ ~- ing his tri � to hi rea!d nee end back to New York City. ( o~ e � Th aon . G TC 2 � affir d (CCA 2); 1947) � l61 � 2d 1~, 35 MfT 1~27. ) In the ceae of h rein p t1tion r , 1t ear tn t 1 diately fter the war in 1945 s e nt to the ited States or medical tre1t nt and lish d her r sidenee there. She c ~k t t e 111 it~ s in 1949. r1n her a ' nee, s a ointed 1 fo otitioner �� er ttcrney-1n-faet t er lff irs during n h r return to he hili lnes, the can~el l � r f ett rney. er th e eire t nee , e r of th opinion th t sa'd exp n es are ore in th n ture of e a nal than bua1n as ex- penses. nd the deci i n ot rea ndent disall in the d ducticn u t ba uatain � � 1 11 no d t rmin(IJ the qu stion rog rding the ntertain ent an rn ic l x en es a ountin to 466. and do ations in exco of 6 in the su of 86. � all incurred _r � de 1 l d t e deduction of hich as (a ) (1 cf the T x de, a - yer is 11 e t duct all th rd!nary a d n cess ry exp n& s paid incurred during th t xabl ye r i carrying any t%ad or busin�$a�. ( ls c 11 ctor vs. hilippin Ed ca- ti nCo�� Inc� � G. o. L- 5, y 30,! 56.) nth 341

er 0 1 � � or c 1 r� 1c rl n die 1 X �� � 342 131

� 273 - 12 - I � f!.nd 0 r ~ 1n re �� disa 1 of exc �� of 6. 44 n 1ng dona~iM d.le� (h) f x 'ode el lo c 8 ppo:rtod at on-.a cb nut or1z s t o d u~t~ n fro a contr n r don thol"e1n ................... d1n 1 of ix of - � t tg far , ela t an 1 � he t&a or t .. 1 11 nee � � itloner a opezl d1 l d , � r or n t t - cu r loa In t co t conten s th t ust n � ld l e � cl � �� tl.n. g -t uncoll ~te�d nt � pz � t:1n rt u. � ci . ov 0 th cla ete court egalnat th at t a puent � sl o 0t 1 d val f 1n th of � 1 at ount 2f , 6 lc ~nt sal f opert � c rdln 1 , t t val of t t date of l s c Le on ��� 1 , 3 � entl , sul d� co - ,. 343

DECJS s � 273 - 13 - tea, ed, a loss of ~. 3.49 .f.n such trllnaaot1on . B~r wav of alternative argu nt , t!ttoner maintain th t even asau tnq that t ber waa a ain 1n the sale , t e tax theref r s.,.;>~l ~ut d that t � propertv w pondent atnta1ns that a g in of l ,600.!H wae al~zed fro t � aale. � av r� th t, for th purpose of d ttr� 111n1n the a1n or loss. arising r he s � � t � bosis should be the value of th Del Pan pro rtv aa reported ~ ap,prov d � h � As ur bv J>espo \ nt , t value t ~o~rt at the t~ of aale as ~7, w 1c it t re u1t after deducting � loss ~~ .ro. t �� e ts.l- tion valu o the h ~ u$ � 'mou.t r�aliz� on t sale of the pro rt,, in 1950 as l62, f>(X). 51 there r - sults a diffe of , 600. 15 which represents th taxa le ..'tJ n. eapo ent eonten a t at t. �� an 1r a1n 1S full' r"turn )1 e2nd t - xabl & ec au e t 1 Del Plm px�o� pertv w an ordinl.r\t asset of etttio er. fh l aw appl1e~ole in t d ter 1n t! n of gain or l oss r csu lt!n fro th sal uf t1t1o r ' a propert �� s foun in � ect1on 3~ of the Tax Code 1ch l:'ead& as foll aa X �( ) In tbe case f propen or 3tt�r arc . f irst. nineteen tb1rteen. tn e at t ereo i ~�~- o rv as cqulre pure s or t kt

cD.Et..CAJS.I E � 273 - 14 - pr.tce or value �� o the 4ate of the ecqu1- s1t1on lf the a wa Kquired r atu1- toua title. � ~ ... Aa the , eat1on ��� in erite :;., pe- t.1t 1oner, the twm upon t tion of � . t ��� the air ar~�t pr c ~ al ue o el an � properi 0t ate it as n erit e � ection 1 9 of the co 1t even � � lations ~o. 2 of t epa n of 1nence) ts s 1 S.c ~~sa of . x o � eft.n � the tair nrlc: value� 1n relet on to pro .r v ae u � �� � evlae, or inn rltance, �� oll ' As afor - t t 1 not � s at r ed petitioner or n lnh r1t e x t v 1. of 77,9 v lu a pr v sl ci bv obate cou t (s e hi it J � p. 25, c., Vol. 1IJ xhl.blt � p. c. , ol. I ) . th 0 .. .ooo. clat ed aa th losa n v lue f t .. hou�� construct 1ch cl llo d � h11 � de ucttd fr t the el Pan �� an lot ( tu n d v 1 of ( ) ( ) r x .Code). p- pralaecl ~or pu� rpose of � t x is, as due n C:OZ'HCtlv fo n thr e p ndent, th1a nt fro � 0 1n of 1 �600. 15 w ! , .J z d it o r ro the sale of said pro rt3v.45 r1t c n- .�

ufClQI � � 273 . - ~~ C. T. A. tention that b of t estat � of t1t1oner�� p&ren l.n the al'l~cgate a .o nt of 8 , 26-4. 00 � ould be eonsld r in the eo putation of val~e of t..he el Pan pro rt et l � of its acqu1s1tlon " peti� ti n fo~ ~ r au 1 t � t propGr a is for the or .I.n l?n o t u fair ark t v 1' of uch propertv f t c~u iti n 1& he lue of t e pro- .rt � u dlill !s a c r � � (..,oe Cra � v. o 1s- stoner of In erl'l 31 �i;J � lt 91 L. Ed 1 1. ) � o Is t r cl 1.! t at the of c lected rents fr Ar ~uld- c s red as affecting t � va~� o t � propertv for t reaao that th same dC!�� not for a put f t v lue t r oi ~ t at as it to this all ed uncollee rents , t petitioner l$ ~till o pUr u egal or 1nistrativ re dv rr de v 11 1 to h r fo~ the eollectlon of th � it o cr� lt rnativ ar u ent t. 1n � liz& tro t aal of the D.l n propertv. f t 11, ls r t~rn tax ble onlv at � � 1n t at aai pro rt � has not n us d in t1t1 er� al s te d al r. r rship of ses, r ot~Ar u11 1n '� even wh n on r e�iv � nts ther fro . d ccupi a n s lf ith the ain en nee and ep 1r t I not to c stitut oua aa. � ( tlle v. r, c;. � o. 7 � r11 ~ 1 rnia8 reover, 12 C.J.S . p. 772, in t rn clt dec! ont fro <ana t, inn ot , Ne! r � 1o d Tex .) 346

I� ~E . � 27 - 16 - .. there is no showing that th.Ls p rt1cul;:r prop�-rt � w s rented qu-t prl r and/<?r ubst quent to tho t!Jn of its that th pa 'i nt 1nc 1~ed to th belief tion for t tl dat c.!e o,, the u � Ar v was a� ~om nS3� t� titione:r: ' opert" os dump- 1ng ground oi i t s Gurplus goods . or ov ~ . !t wa� . but a S.L"l le and 1 olnted transac tion , brou 9ht abou t b-o, th ex!gtmoie of w .r, h en co pelled the ericM il it~r .. authqr1t �� to unloa and dump the r.uppl~ s r.mg Dewe ulevard w.t\ere t1t1oner �& pro ert,, is locat d. he D�l Pan prop rt,, could not , t. er fore , be deell1ed t o have be� n uaed l n pet ~ tioner � s uslneas r al est t .ealer. ( r p~rial v. ollee to of Internal ~ue, ,_ ptct~bcr � � 1955). H nc � t~e ro� pert constituted eapi al sset of tion 34, Tax o e) and &l nce it es hold b,, petit ion r f or ore t nn twelve nths, t.h ~in l!zed fro:n its . sale iS eturn ble and t~ able onlv t (~~c. 34 ( ) ( 2) of the ta~ Code) s c nt nd ..cl rJ p tltlon e n co � to tle l~&t " sue h!.ch :rel l.oil~ " t e poa it ~on of the urch rge , In ~ter tntng ~ leg l i t v of the �position of the ~ sure rge b � r s- pondent , it wo~ ld 11 to loo tnto our juri prude c n the at ~ r . '\I i'be pr1nc l pl is .11- s ~t l d t .a"'" fr d can ne er be presum d (De ~od3 v. talk, 4 11. !04 , quoting 12 ~1 426J � enzl o. v . asti~a , 63 r~rl. ln) . espondent hav1 all eged fraud , it $ lncu nt upon him to prove 1t& ex1 tence. i co proof ot f r aud U5 t center on �wilfulness� aa ita cruc1a1 core , nd " . 1- .. 34 7

� � 27;, t----- - 17 - fulnes 1r g en ��h it t ith int nt" a t rt � in . 1t 1$ hardl� u c~pt le f proo bv d1rec ev1 nc � a. al e 1 enc hor � fore a s1 n tl u of ..fr ud (U. � v. c ford, 44t 2 ) ' , c ted l t r , F ud /nd r t'. d r 1 ax La � p. t� Li Yao v. Co 1 ct r of I n- ternal eve � �� � � o� � July 1, 1 o6) . degre of proof e cl r tt I 8 h th a c nv ctng. ( 1 fit v. Co � F {"' ) 7 2 , d r 1 Inc . Tax t t.on , ol� cite v ,r ns, 0 1 � p. � ) 11 ( o1ng 1 t 11-est l i h d rul tnd, 1n n f 11 c ra t1ti on � Tl ct t l1&h do not convtnc lnglv sh c� . th t petition r f11 d false r fr u ul nt r turn tith intent to ev nt ax � ux of rov G r l. t v t - t t re in or lo � n t 1 .. of 1 on t t rpr v d pr r , 11 tv f pr t f pe n .. c or 1r lee f �t ro f p 1ti r co &ion or /hi she hoe t 1 ppr Wi an nal for fr � .oreov r , r , !.n an explanato , J to c "0 .t X retux-n (�x ts and 12, p. 1, r �� 0 � ) has furnished the data �wtth 1ch. respondent cou v 34 ~31 �

DECISIQ � C�� A. CASE � 273 - 19 - .. d ~ t ~ ! ned the correct act;~u1sition v l u of th(l p.ropertv. B referring to th pertinent r cor s of ~state of J . � � olfson , � sc No. 70073, Court of f 1rst Instance of Manila (ctt d ins id chedule �o ), respondent coald have v�rifted t he correctness or incorr ctnes- of.t ret urn d ae~~1$!tion vnlue of t he Del n prop rtv. lth this S c hedul " att c hed thereto , petition~r � s tnco � t x turn co1ld not h v 1slcd spon nt fro ving at the c rr ct cqu1 t n pric of the prop rt �� And ven tn tha a s nee of th Sc ..edul , re pondont could not us � , th r fact that h pr�� ., s es ed and c llee ted the inherit ca x o the pro r t1 s o p t1t1on r� p r nt , h is char d ~ th kno 1 d of th c rr ct cqut 1t1on value of t 0 1 a pro rt ' � hich 1s p ..rt of � 1d pr pert es . p t ioner h s not n cl arl�r 8 d at! factor!l�� ho n t o h v f11 ~ f la or fraudul nt r turn wit int nt to eva t ' p nt of t x � EF , the e~i&!on pp al d_from 1 od1f1 d 1 d pet ti n�r s h reb r rd r to pa ' to th ~ n� nt Coll ctor of Int n&l venue or h~ author1z d d - pu t h su of o, 3 .00 d f c1ene !nco t x f ~ the .. , as computed 1n nn x 1 A r~of . pl~s � rc ~ar and !nt r t th nc nt to 11nqu nc � d c lare th nco t x pa, � nts er tofor ad b, t!tioner for th nd 9 s full s t1sf c- t1on th reo� . ! t hout pronounc nt s to cost� � RED . 349 '

- 19 - nlla, ll1ppin � Julv 16, 19~. c ,. . ~~ 0....~~>' /) P, ~.(., W.. G. , t/6 (tM c.AP 1 L- ~~~t( ~ , H), S1 350

Net inco as r return � � � � � � � � � � � � � � � 14,682.38 a�le Add: (1) ~ of c pita! gain fro the of Del Pan propert�� ����������������~�� e.2 ,300.25 { 2) O!sallO\'f d (:it:r ona1 expent#es .. a. Pas s a e to u. � �� . 934 . 1 b. g - excess. 1 o. oo c. Ho~pit 1, d ctors otel , on a- tJ.on � cc. ��� Total �������������� � L ss; L 1vtng ex- pense .tncl e ebove ����������� et J.nco. � ���������������������������� Les a Per on 1 xe. pt iou ��� ������������ Taxable r.nco ������������������������� Income tax duet er. � on ����������������� 23,8 5. Less: .ount alread�r sses ed ou w.+ch 1. 11.77 $paid �������� Def1c:tenc � income t x oue �������������� .. 351