2013 (Taxation) Bar Exam Questions: Multiple Choice Question 16

[Discuss/answer the question below. Or see Taxation Instructions; Taxation Essay Questions: 12, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12; Taxation Multiple Choice Questions: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 1517, 18, 19 and 20; See also 2013 Bar Exam: Information, Discussions, Tips, Questions and Results]


Aleta sued Boboy for breach of promise to marry. Boboy lost the case and duly paid the court’s award that included, among others, P100,000 as moral damages for the mental anguish Aleta suffered.

Did Aleta earn a taxable income? (1%)

(A) She had a taxable income of P100,000 since income is income from whatever source.

(B) She had no taxable income because it was a donation.

(C) She had taxable income since she made a profit.

(D) She had no taxable income since moral damages are compensatory.


  1. I answered D dahil i deemed that moral damages compensate for the injury or suffering incurred by Aleta, hence the same cannot be considered as a taxable income.

    as per Dimaampao, pwede ring A in strict application of tax law, any income derived from whatever source is taxable.

  2. Pwede nga both for me, but i had second thoughts on D, because if you will look at sec. 2 (4) of the NIRC my personal observation is, the damages referred to pertains to personal injury or sickness. And if you look at the first two enumeration on Accident or Health Insurance or under workmens compensation acts, the conclusion is that it also refer to PHYSICAL injuries, I just applied ” expressio unios est exclusio alterius, hence sa A ako napunta. ( sori sa latin maxim, di ko alam kung tama, practice lng po)

  3. well, under the civil code, specific yung grounds wherein moral damages can be awarded.

    since the case involves a renege on a promise to marry, Aleta may have suffered mental anguish, wounded feelings, social humiliation or similar injury that is not physical in nature which the court deems to warrant an award of moral damages in her favor.

  4. Moral damages are taxable as income. Mental anguish is not physical injuries, therefore moral damages awarded due to moral anguish are not excluded from income.Amount received as a compensation for personal injuries plus amounts of any damages received on account of such injuries are excluded from taxable income if the personal injuries are physical in character.Exclusions from taxable income are considered as exemptions from taxation, hence to be interpreted in strictissimi juris against the taxpayer. The words “personal injuries” should be given a restrictive meaning to refer only to physical injuries. This interpretation finds basis in Sec. 32 (B) (4), NIRC of 1997 which refers to “Accident or Health Insurance or under Workmen’s Compensation Acts, both of which refers to “physical injuries or sickness”. This could only mean physical injuries. -domondon. Tama si anon. Mali tayo benj. Hehe

  5. i remembered asking my prof about this one, sabi niya it goes either way because ambigous yung damages as defined. kaya lang para sa kanya it should be non-taxable kasi compensatory daw siya, he said na yan ang compensation mo for the mental suffering you get because of the act of the other party. it is a means for you na aliwin ang sarili mo to alleviate any suffering you experienced. i also remembered reading somewhere that the it is the same view as justice dimaapao. Thus i answered D.

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