CAPITAL GAINS
TAX
ORDINARY ASSETS
VS.
CAPITAL ASSETS
Ordinary assets
Assets held for sale
Assets held for use
Asset classification rules
Ordinary assets
assets held for future use
discontinuance
real properties used or have been previously used
depreciable assets
Capital assets
used in business by a taxpayer by a taxpayer not engaged in real estate business if not used
for more than 2 years are automatically converted to capital assets
Real properties used by exempt corporation in its exempt copr
Which of the following is considered as a capital asset subject to
Capital Gains Tax?
a. An unsold open lot of Real estate Developer
b. A fully depreciated truck that is still in use
c. A foreclosed collateral property held by the bank
d. A church building
types of gains
ordinary gain
capital gain
capital gain subject to CGT
sale of domestic stocks sold directly to buyer
real property not used in business
capital gain subject to CGT
sale of domestic stocks sold directly to buyer
- 15% CGT
real property not used in business
- 6% CGT
CGT on sale of domestic stocks sold directly to buyer
Net gain
Selling price
less:
basis of stocks disposed
selling expenses
DST
CGT on sale of domestic stocks sold directly to buyer
selling price
cash sale - consideration received
partly cash, partly in kind - sum of money
and fair value of property
exchange - fair value of property received
CGT on sale of domestic stocks sold directly to buyer
Basis of stocks
acquired by purchase
cost of the property acquired
specific identification
moving average
FIFO method
CGT on sale of domestic stocks sold directly to buyer
Basis of stocks
acquired by devise, bequest, or inheritance
FV at the time of death of decedent
CGT on sale of domestic stocks sold directly to buyer
Basis of stocks
acquired by gift
lower of FMV at the time of gift and the
basis in the hands of the donor or the last
preceding owner by whom it was not
acquired by gift
CGT on sale of domestic stocks sold directly to buyer
Basis of stocks
acquired for inadequate consideration
amount paid by the transferee of the
property
Installment payment of CGT
a. selling price exceeds P1,000 AND
b. initial payment does not exceed 25% of the
selling price
CGT on sale of real property
6% of the selling price or FV, whichever is higher
F
Fair value of real property
higher of zonal value
fair market value
CGT on sale of real property
exemption F
sale of principal residence for the
reacquisition of a new principal residence by
individual taxpayers
Exemption from CGT - Principal Residence
the seller must be as citizen or resident
sale involves the principal residence
proceeds is utilized in acquiring new principal residence
the BIR is duly notified within 30 days
the reacquisition must be within 18 months from date of sale
CGT is held in escrow in favor the government
can only be availed once in every 10 years
the historical cost or adjusted basis of the principal residence sold
shall be carried over to the new principal residnece built or
acquired
Exemption from CGT - Principal Residence
full utilization of proceeds in exempt
basis of new residence with full utilization
basis of the old residence plus additional cost incurrec by the
taxpayer in acquiring the new residence
Exemption from CGT - Principal Residence
partial utilization is partially exempt
basis of new residence with partial utilization
basis of the old residence x utilized proceeds / total proceeds
Exercises
Sale of unlisted Equity Securities directly to a buyer is subject to
A. 15% Capital Gains Tax
B. Stock Transaction Tax
C. Regular Income Tax
D. 6% Capital Gains Tax
Which of the following is considered as a capital asset subject to
Capital Gains Tax?
a. An unsold open lot of Real estate Developer
b. a fully depreciated truck that is still in use
c. A foreclosed collateral property held by the bank
d. A church building
Which of the following is considered as a capital asset subject to
Capital Gains Tax?
a. An unsold open lot of Real estate Developer
b. a fully depreciated truck that is still in use
c. A foreclosed collateral property held by the bank
d. A church building
Sale of unlisted Equity Securities directly to a buyer is subject to
A. 15% Capital Gains Tax
B. Stock Transaction Tax
C. Regular Income Tax
D. 6% Capital Gains Tax
De Asis Corporation reports the following dealings in capital assets:
2018 2019
Compute for the net capital gains
in 2019.
Net income 10,000 80,000
A. 20,000
B. 30,000
C. 15,000
Capital gains 30,000 50,000 D. 0
Capital loss 45,000 20,000
De Asis Corporation reports the following dealings in capital assets:
2018 2019
Compute for the net capital gains
in 2019.
Net income 10,000 80,000
A. 20,000
B. 30,000
C. 15,000
Capital gains 30,000 50,000
D. 0
Solution: (50,000 – 20,000) = 30,000.
Capital loss 45,000 20,000 This is a corporation. Holding period
and carry-over rule doesn’t apply
Andy, a realty dealer, sold domestic common stock to DEF, Inc. at a
gain of P300,000.00. Compute the Capital Gains Tax.
A. P0
B. P45,000
C. P18,000
D. P15,000
Andy, a realty dealer, sold domestic common stock to DEF, Inc. at a
gain of P300,000.00. Compute the Capital Gains Tax.
A. P0
B. P45,000
C. P18,000
D. P15,000
What is the income rate on presumed capital gain on sale of real
properties classified as capital assets which are located within
Philippine territory?
A. 15% on gain on sale
B. 6% on gain on sale
C. 15% on selling price or fair market value or zonal valuation
whichever is the highest
D. 6% on selling price or fair market value or zonal valuation,
whichever is the highest
What is the income rate on presumed capital gain on sale of real
properties classified as capital assets which are located within
Philippine territory?
A. 15% on gain on sale
B. 6% on gain on sale
C. 15% on selling price or fair market value or zonal valuation
whichever is the highest
D. 6% on selling price or fair market value or zonal valuation,
whichever is the highest
Red sold to Blue shares of stock of a foreign corporation at a selling
price of P1,000,000 with an acquisition cost of P380,000. On the
same date, Red sold to Blue shares of a stock of a domestic
corporation at a selling price of P600,000, and an acquisition cost
P400,000.
If Red is a resident citizen and is not a dealer in securities, and the
shares were sold directly to Blue, how much is the capital gains tax
due of Red from the transaction?
Answer: 30,000
Selling Price 600,000
Less: Acquisition cost (400,000)
Net capital gain 200,000
x CGT rate 15%
CGT due 30,000
ROB had sold the following capital assets after deciding to move from Caloocan to Pampanga:
Lot 1 Lot 2 Lot 3
Selling Price 1,125,000 3,750,000 6,000,000
Cost 475,000 4,500,000 1,500,000
Mortgage 550,000 0 1,000,000
Terms of sale
Down payment – 2021 75,000 375,000 750,000
1st Installment – June 2021 75,000 375,000 375,000
2nd Installment – November 2021 75,000 600,000
ROB had sold the following capital assets after deciding to move from Caloocan to Pampanga:
How much is the capital gains tax due for the year 2021 for the Lot 1?
ROB had sold the following capital assets after deciding to move from Caloocan to Pampanga:
How much is the capital gains tax due for the year 2021 for the Lot 1?
67,500
Solution: 1,125,000 * 6% (CGT was paid full because the down payment [75,000],
installment [75,000+75,000] and the constructive receipt [550,000-475000] over the
selling price [1,125,000] is 26% which is greater than the 25% ceiling)
ROB had sold the following capital assets after deciding to move from Caloocan to Pampanga:
How much is the capital gains tax due for the year 2021 for Lot 2?
45,000
Solution: [375,000+375,000} * 6% (CGT was paid in installment since the down payment
and installment [375,000 + 375,000]/Selling Price [3,750,000]) = 20% which is less than
the 25% ceiling)
ROB had sold the following capital assets after deciding to move from Caloocan to Pampanga:
How much is the capital gains tax due for the year 2021 for Lot 3?
360,000
Solution: [6,000,000} * 6% (CGT was paid full because the down payment [750,000] and
the installment [375,000+600,000] over the selling price [6,000,000] is 28.75% which is
greater than the 25% ceiling) Note: there is no constructive receipt because the
mortgage is less than the cost
