Practice question
An insured receives P200,000 that is stipulated to be a qualifying return of paid premiums and a separate P30,000 yield not covered by any exclusion. The insured invokes the premium-return exclusion for all P230,000. What is sound?
- Every insurance-related receipt is excluded forever
- The P200,000 must always be taxed as salary
- The yield automatically becomes returned capital
- The capital-return exclusion does not by itself exclude the separate yield, which requires its own tax treatment
- The insurance contract cancels every tax law
Legal references
- NIRC, Sections 26, 32(B) and 40(A), (C)(3)-(5), read with later amendments: https://lawphil.net/statutes/repacts/ra1997/ra_8424_1997.html
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