Section 5
SEC. 5. In computing net income in the case of a citizen or resident of the Philippine Islands: (a) For the purpose of the tax there shall be allowed as deductions— First. The necessary expenses actually paid or incurred in carrying on any business or trade, not including personal, living, or family expenses. Second. All interest paid within the year on his indebtedness except on indebtedness incurred for the purchase of obligations or securities the interest upon which is exempt from taxation as 'income under this Law. Third. Taxes paid within the year imposed by any foreign government, by the Government of the Philippine Islands, or by any province, city, municipality, or township, not including those assessed against local benefits. Fourth. Losses actually sustained during the year, incurred in his business or trade, or arising from fires, storms, shipwreck, or other casualty, and from theft, when such losses are not compensated for by insurance or otherwise: Provided, That for the purpose of ascertaining the loss sustained from the sale or other disposition of property, real, personal, or mixed acquired before March first, nineteen hundred and thirteen, the fair market price or value of such property as of March first, nineteen hundred and thirteen, shall be the basis for determining the amount of such loss sustained. Fifth. In transactions entered into for profit but not connected with his business or trade the losses actually sustained therein during the year to an amount not exceeding the profits arising there from. Sixth. Debts due to the taxpayer actually ascertained; to be worthless and charged off within the year. Seventh. A reasonable allowance for depreciation of property arising out of its use or employment in the business or trade. Eighth, (a) In the case of oil and gas wells a reasonable -allowance for actual reduction in flow and production to be ascertained not by the flush flow, but by the settled production or regular flow; (b) in the case of mines a reasonable allowance for depletion thereof not to exceed the market value in the mine of the product thereof, which has been mined and sold during the year for which the return and computation are made, such reasonable allowance to be made in the case of both (a) and (b) under rules and regulations to be prescribed by the Collector of Internal Revenue with the approval of the Secretary of Finance: Provided, That when the allowances authorized in (a) and (b) shall equal the capital originally invested, or in case of purchase made prior to March first, nineteen hundred and thirteen, the fair market value as of that date, no further allowance shall be made. No deduction shall be allowed for any amount paid out for new buildings, permanent improvements, or betterments, made to increase the value of any property, and no deduction shall be made for any amount of expense of restoring property or making good the exhaustion thereof for which an allowance is or has been made. Ninth. Contributions or gifts actually paid or made within the year to corporations or associations organized and ; operated exclusively for religious, charitable, scientific, or educational purposes, or to societies for the prevention of cruelty to children or animals, no part of the net income of which inures to the benefit of any private stockholder or individual, to an amount not in excess of five per centum of the taxpayer's taxable net income as computed without the benefit of this paragraph. Such contributions or gifts shall be allowable as deductions only if verified under rules and regulations prescribed by the Collector of Internal Revenue with the approval of the Secretary of Finance. (b) For the purpose of the normal tax only, the income embraced in a personal return shall be credited with the amount received as dividends or net profits subject to the tax established in subsection (a) of section ten. (c) A like credit shall be allowed as to the amount of income, the normal tax upon which has been paid or with held for payment at the source of the income under the provisions of this Law. NONRESIDENT ALIENS.