Practice question
A resident citizen operates a profitable repair shop and also earns covered Philippine-source interest on an ordinary bank deposit opened in 2026. The shop requires daily active work; the deposit does not. No exemption or transitional protection applies. He argues that the interest must be ordinary shop income simply because he uses one personal bank account. Which analysis is best?
- The account’s ownership makes all income active
- The shop profits and covered deposit interest retain distinct earning characters and governing tax treatments
- All shop profits become passive once deposited
- Every bank balance is itself taxable income
- The taxpayer may erase interest by naming it sales
Legal references
- NIRC Sections 22(MM) and 24(B), as amended by RA 12214, Sections 3-4: https://lawphil.net/statutes/repacts/ra2025/ra_12214_2025.html
- NIRC Sections 32 and 34: https://lawphil.net/statutes/repacts/ra1997/ra_8424_1997.html
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