FOR income taxes to be due, there must be a realized income. Thus, it is critical to determine what is income and when it is realized for tax purposes.

Income is the inflow of wealth. As early as 1922, the Supreme Court defined income as the gain derived from capital, from labor or from both combined, and includes profit gained through a sale or conversion of capital assets (Fisher v Trinidad, GR 17518, Oct. 30, 1922). Further, in the case of Commissioner of Internal Revenue v Japan Air Lines Inc., income is defined as cash received or its equivalent, or the amount of money coming to a person within a specific time. It means something distinct from principal or capital. (GR 60714, Oct. 4, 1991).