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Chapter 12 - Dealings in Property

The document discusses tax rules related to dealings in property and capital gains or losses for individuals and corporations. It covers what is included in the selling price of property, rules for determining net capital gain or loss, differences between individual and corporate taxpayers, tax free and taxable exchanges, transactions considered exchanges, and examples of calculating net capital gain or loss including loss carryovers.

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alsuarez
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25 views

Chapter 12 - Dealings in Property

The document discusses tax rules related to dealings in property and capital gains or losses for individuals and corporations. It covers what is included in the selling price of property, rules for determining net capital gain or loss, differences between individual and corporate taxpayers, tax free and taxable exchanges, transactions considered exchanges, and examples of calculating net capital gain or loss including loss carryovers.

Uploaded by

alsuarez
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 12 – Dealings in Property

What are included in the selling price on dealings in property?

Correct

1. The sum of money received and

2. Fair value of non-cash properties received

What are the three rules in the determination of net capital gain or net capital loss of an individual
taxpayer?

Correct

1. Loss limitation rule – the capital loss can only be deducted from capital gains (cannot be deducted from
ordinary gains)

2. Holding period rule :


Short term capital asset - If the capital asset is held for 12 months or less, 100% of the gain or loss shall be
recognized
Long term capital asset - If the capital asset is held for more than 12 months, 50% of the gain or loss shall be
recognized

3. Net capital loss carry over rule – the net capital loss (capital loss is higher than capital gains) during the
year can be carried over in the next year, but not to exceed the taxable net income of the previous year

What is the rule in the determination of net capital gain or net capital loss of a corporate taxpayer?

Correct

Only the Loss limitation rule will apply to corporate taxpayers

What are the tax free exchanges?

Correct

1. Merger and consolidation

2. Initial acquisition of control

What are the Taxable Exchanges?

Correct

1. Share-for-share swap transactions or property-for-share transaction that are not in pursuant to a plan of
merger or consolidation are taxable. Losses are recognized subject to the applicable tax rules.
2. Transfer of properties to a corporation alone or with four (4) others which did not result in the acquisition of
corporate control.

3. Transfer of properties to a controlled corporation after the initial acquisition of control is taxable. Losses are
non-deductible since the transferee is a related party to the transferor.

What are the transactions that are considered as exchanges?

Correct

1. Retirement of bonds, debentures, notes or certificates and other evidence of indebtedness

2. Short sale of properties

3. Failure to exercise a privilege or option to buy or sell property that is a capital asset

4. Security becoming worthless

5. Receipt of liquidating dividends

6. The amount received in liquidation of a partnership is also deemed in exchange of partner’s interest on the
partnership

7. Redemption of shares for cancellation or retirement by a corporation is considered exchange to an


investor, but not the redeeming corporation

8. Voluntary buy-back of shares to be held in treasury is considered exchange to the investor, but not to the
corporate issuer of the shares

A resident individual taxpayer has the following transactions for his capital assets during the year
2020: capital gains of assets held for 12 months, P10,000 and a capital loss of assets held for 18
months of P18,000. How much is the net capital gain or net capital loss?

Correct

Net Capital Gain of P1,000 computed as follows:

Capital Gains (100%) P10,000

Less: Capital Loss (50%) 9,000

________

Net Capital Gain P 1,000

A corporate taxpayer has the following transactions for his capital assets during the year 2020:
capital gains of assets held for 12 months, P10,000 and a capital loss of assets held for 18 months of
P18,000. How much is the net capital gain or net capital loss?

Correct

Net Capital Loss of P8,000, computed as follows:


Capital Gain (100%) P10,000

Less: Capital Loss (100%) 18,000

-------------

Net Capital Loss (P8,000)

A resident individual taxpayer has the following transactions for his capital assets during the year
2020: capital gains of assets held for 14 months, P10,000 and a capital loss of assets held for 10
months of P18,000. The taxable net income of the taxpayer during the year 2020 is P10,000. For the
year 2021, the taxpayer has a capital gain for an asset held for 8 months amounting P15,000 without
any capital loss. How much is the net capital loss for the year 2020 that can be carried over during the
year 2021?

P10,000 computed as follows:

For the year 2020

Capital Gains (50%) P 5,000

Less: Capital Loss (100%) 18,000

-------------

Net Capital Loss (P 13,000)


vvvvvvvv

Taxable Net income for 2020 is P10,000

The Net Capital Loss that can be carried over should not exceed the Taxable income of the previous year, so
the amount that can be carried over is only P10,000, the net taxable income of 2020.

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