Practice question
A lender receives repayment of P100,000 principal and P8,000 interest. Assume no special tax rule. Which is the basic income-capital distinction?
- The principal restores capital; the interest is the return or income component
- Every peso is automatically new income
- No part can ever be income
- Only the physical payment envelope is income
- The principal becomes salary
Legal references
- https://lawphil.net/judjuris/juri1918/aug1918/gr_l-12287_1918.html — Madrigal v. Rafferty, G.R. No. L-12287, August 7, 1918, main opinion
- https://lawphil.net/judjuris/juri2021/jul2021/gr_226287_2021.html — CIR v. Shinko Electric Industries, G.R. No. 226287, July 6, 2021, main opinion
- https://lawphil.net/statutes/repacts/ra2025/ra_12214_2025.html — RA 12214, section 8 amending NIRC section 32
Answer this question in flashcards to review your response and continue practicing.