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Note to candidates: This rule on capital gains on sale of domestic stocks directly to
buyer is uniform to all income taxpayers (individuals or corporate) regardless of
classification.
The rule do not applies to:
1. Gains on sale shares of stock is that is traded in the Philippine Stock Exchange
(PSE)
This is subject to a transaction tax (percentage tax) of of 1% of selling price.
2. Gains under similar conditions by security brokers or dealers
When to file the Capital Gains Tax Returns?
1. Per transaction basis: Within 30 days after each transactions
2. Annual basis:
a. For individuals On or before April 15 of the following year
b. For corporations On or before the 15 th day of the fourth month following the
close of the taxable year
When to pay the capital gains tax?
1. Lump sum Upon date of filing the return with the Bureau (within 30 days from
date of sale)
2. Installment tax on installments is due within 30 days from receipts of each
installments
Documentary Stamp Tax
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Par value stock: P0.75/P200 or fractional part of the par value of due bill,
certificate of obligation or stock
No-par stock: 25% of the documentary stamp tax paid on the original issue of said
stock. (The documentary stock on original issue of non-par stock is based on actual
consideration for the issuance Sec. 174 NIRC)
Limit: Only one tax shall be collected on each sale or transfer of stock or
securities from one person to another regardless of whether or not a certificate of
stock is issued or obligation is issued, indorsed, or delivered in pursuance of such
sale or transfer.
Deadline: Documentary stamp tax return shall be filed within 10 days after the
close of the month when the taxable document was made, signed, issued, accepted
or transferred, and the tax thereon shall be paid at the same time the return is
paid.
Market Value)
The fair market value for purposes of the capital gains tax is whichever is higher of:
1. Zonal value as prescribed by the Commissioner of Internal Revenue
2. Assessed value as determined by the Provincial or City Assessors Office
Gross selling price The amount of any money received plus the fair market value of
any property received. Interest on the selling price shall be treated separately as Other
Income taxable under regular income taxation.
Excess Mortgage Assumed
The excess of the mortgage assumed over the cost of the property is included both in
initial payment and selling since it is a constructive receipt of income; in other words,
it represents extra consideration.
Note to Candidates: The basis of the tax is on the gross selling price or gross fair
market value. This treatment presumes the existence of gain and is applied regardless
of the existence of actual gain.
SCOPE OF THE 6% CAPITAL GAINS TAX:
Individuals
Citizen
Alien
Location of
NonNRReal
Reside Reside Reside
ETB
Property
nt
nt
nt
Philippines
Abroad
Corporation
NRNETB
Domest
ic
Reside
nt
Nonresiden
t
Not Applicable
Note to Candidate: Regular income taxation, being the general rule, applies where the
6% final capital gains tax do not apply. Under regular taxation, the actual net gain is
subject to regular income tax.
How is the capital gains tax paid?
1. The tax is withheld at source the seller and buyer files a joint capital gains tax return
(one return per sale or foreclosure sale).
2. Installment (one return for each installment payment receive)
The tax is withheld at source in installments when the taxpayer qualifies and opted to
be taxed on installments.
Alternative Taxation:
The actual net gain on the sale of real property may be included under progressive
income taxation.
Requisites:
a. the seller is an individual
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Unutilized portion
Gross selling
price
6%
Utilized Selling
Gross Selling
Price
More than full utilization of proceeds:
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Security
Dealer
Merchandiser
Vacant lot
Office supplies
Domestic stocks
Bonds
Accounts/notes receivables
Office building
Office equipments
Land where the office building stands
Personal car of the business
proprietor-taxpayer
Personal house and lot of the
proprietor-taxpayer
Jewelry of the proprietor-taxpayer
DRILL PROBLEMS: CAPITAL GAINS ON THE DISPOSAL OF DOMESTIC STOCKS
A. Transactional Capital Gains Tax
For each of the following scenarios, compute the capital gains tax:
Illustrative Cases
1. Andy sold domestic stocks through the PSE at a gain of P400,000
2. Andy, a security dealer, sold domestic stocks through the PSE at a gain
of P400,000
3. Andy, a security dealer, sold domestic stocks directly to a buyer at a
gain of P400,000
4. Andy, a realty dealer, sold domestic common stock to DEF, Inc. at a
gain of P300,000.
5. ABC, Inc. sold domestic stocks though the PSE at a gain of P400,000
6. ABC, Inc. issued its shares of stock at P300,000 in excess of its par
value.
7. ABC, Inc. exchanged the shares of DEF, Inc. it acquire for P1,000,000
for a lot valued at P1,400,000.
8. Andy sold his investment in domestic stocks to the issuing Company,
ABC, Inc. The transactions realized a gain of P300,000.
9. Andy sold domestic bonds through the PDEX at a gain of P100,000.
10.Andy sold domestic bonds directly to buyer at a gain of P400,000
11.Andy sold his interest in a partnership for P400,000. His interest had a
tax basis of P300,000 at the date of sale.
12.ABC, Inc. acquired DEF stock rights for P200,000. ABC subsequently
disposed this rights for P400,000.
13.Andy purchased a stock option from DEF, Inc. Subsequently, Andy sold
this options at a gain of P50,000.
14.Andy purchased domestic common stock for P100,000 and sold the
same for P180,000. At the date of sale the stock has a fair market
value of P210,000.
15.Andy purchased ordinary shares for P200,000 from DEF, Inc., a
resident corporation operating in the Philippines. After 2 years, it sold
the same directly to buyer for P300,000 when the fair market value
was P280,000.
Capital
Gains Tax
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Purchas
e
10,000
Sale
Price
3/6/9
4/5/9
1,000
-
10,000
4/15/9
10/28/
9
11/15/
9
11/23/
9
12/5/9
12/14/
9
10,000
600
-
400
10,000
500
8,000
Security
Capital Gains
Tax
P
10
1,000
21
GSM common
stocks
PLDT bonds
GSM common
stocks
1,100 PLDT bonds
16 GSM common
stocks
980 PLDT bonds
12 GSM common
stocks
950 PLDT bonds
13 GSM common
stocks
ABC, Inc. had P300,000 operating income. GSM and PLDT are both domestic
corporations.
Required: Compute the following
1. Capital gains tax per transactions where applicable
2. Annual capital gains tax payable or (refundable) _________
3. 2010 taxable income of the taxpayer
_________
4. Tax basis of the GSM common stocks
_________
5. Tax basis of the PLDT bonds
_________
2. Andy exchanged his DEF, Inc. shares which he previously acquired at P200,000 for
the shares of ABC, Inc. valued at P300,000 in pursuant to a merger agreement
between DEF, Inc. and ABC, Inc. Compute the capital gains tax. __________
3. On July 1, 2010, Andy sold his domestic stocks with aggregate par value of
P250,000 and acquisition cost of P300,000 to Betty for P500,000. Betty made a
downpayment of P50,000 and signed a note for the balance payable in 9 semiannual installments starting December 31, 2010.
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on the sale
__________
__________
Capital
Gains Tax
B. Special Cases
1. Scope of Exemption
Information for the property disposed of:
Zonal value
P
3,000,000
Assessed value
2,500,000
Appraised value
3,500,000
Cost
2,000,000
For each of the following independent, indicate the capital gains tax:
Illustrative Cases:
1. Andy sold his principal residence for P4,000,000. He immediately
repurchased a new residence for P4,200,000.
2. Andy sold his principal residence for P2,500,000. He immediately
repurchased a new residence for P2,000,000.
3. Andy sold his principal residence for P2,500,000. He immediately
repurchased a new residential lot for P2,000,000.
4. Andy sold one of his residential property for P4,000,000. He
immediately repurchased a new residence for P4,200,000.
5. Andy sold his residence lot for P4,000,000. He immediately
repurchased a new residence for P4,200,000.
6. DEF, Inc. sold a vacant lot for P4,000,000. Within 18 months, it
used the proceeds to purchased residential houses for its directors
and officers.
7. Andys house and lot was one of the several properties to be
expropriated by the government to build on an airport. The
government paid Andy P3,000,000. Andy leases his residence since
then. Andy opted to be subjected to capital gains tax.
8. Andys house and lot was foreclosed after his failure to pay the
CGT
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P
100,000
100,000
600,000
P
150,000
200,000
600,000
c. P 850,000
d. P1,000,000
2. Contract price
a. P 750,000
b. P 800,000
c. P 850,000
d. P1,000,000
3. Initial payments
a. P 100,000
b. P 200,000
c. P 250,000
d. P 150,000
b. P17,647
c. P22,333
d. P 60,000
b. P12,750
c. P14,325
d. P15,000
d.
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75,000
75,000
d. P750.00
d. P 612.50
7. To facilitate the disposal of his shares, Freddie sold his shares for P360,000 at 10%
discount from its fair value. Even at discounted price, Freddie reports a gain of
P160,000. Compute the capital gains tax on the transaction.
a. P 21,000
b. P 11,000
c. P 16,000
d. P 15,000
8. Which of the following is not a requisite of installment payment of capital gains tax in
installment involving the sale of personal property?
a. Downpayment must not exceed 25% c. The item sold is not inventoriable
b. Selling price must exceed P1,000
d. Initial payment must not exceed
25%
9. Abdul Rhamanam Ahmin, a non-resident alien disposed his stock investments in a
domestic corporations to Juan dela Cruz, a non-resident citizen, at a gain of P300,000.
Which statement is correct?
a. The sale is not subject to capital gains tax since the property involved is a personal
property is deemed located abroad.
b. The sale is not subject to capital gains tax as Juan dela Cruz, the buyer, is a nonresident individual.
c. The sale is subject to capital gains tax even if the sale occurred outside the
Philippines.
d. None of these.
10.Meiko Acebo is a stock broker and holds 10,000 ordinary stock of San Miguel
Corporation, a domestic corporation, acquired at P100 per share. His valuation for
San Miguel Corporation indicates that San Miguels stocks will decline in the near
future. If Meiko sells his stock investment directly to a buyer, Zeus Millan, at P115 per
share, how much is the capital gains tax payable on the transaction?
a. P5,000
b. P10,000
c. P5,750
d. P 0
11.Mr. Acebo, a non-security broker or dealer, made the following dispositions directly to
buyer:
Date
2/4/8
Domestic securities
Abacus ordinary shares
5/8/8
7/15/8
PLDT bonds
Globe preferred shares
9/20/8
11/15/8
Gain/(Loss)
P
150,000150,000(
80,0
00)
50,00080,000-
Compute the amount of capital gains tax payable (refundable) of Mr. Acebo for the
year 2008.
a. (P1,500)
b. P15,000
c. P 0
d. P38,000
12.Which of the following entities is not exempt to the final capital gains tax imposed on
the sale, exchange and other disposition of real property?
a. Banks on their sale real and other assets acquired in the Philippines
b. Resident corporations on their land not used in business in the Philippines
c. Real estate developer or dealer on their sale of condo units
d. Resident citizen on his sale of one of his residence under foreclosure sale
13.The actual capital gain derived by an individual taxpayer may be included to all
income subject to progressive income tax when
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It
It
It
It
involves
involves
involves
involves
14.Ms. Janet Ranillo, a real estate dealer, sold a real property for P200,000 on October
29, 2007 in installment. The cost of the property was P150,000. The terms of the sale
agreed upon by Ms. Ranillo an the buyer were:
Downpayment
P 40,000
Balance, payable in monthly installments
of P10,000
160,000
beginning November 29, 2007 until
fully paid
How much income will be reported in 2007?
a. P12,500
b. P15,000
c. P50,000
d. P75,000
15.Ms. Lyn Rosales, a real estate dealer, sold a real estate for P2,000,000 on November
29, 2007. The cost of the property was P1,500,000. The terms of the sale were as
follows:
Downpayment
P
400,000
Balance, payable in monthly installments
of P100,000
1,600,00
beginning December 29, 2007 until
0
fully paid
How much was the income to be reported in 2007?
a. P100,000
b. P112,000
c. P125,000
16.Compute the capital gains tax in the above case.
a. P 30,000
b. P 40,000
c. P120,000
d. P140,000
d. P 0
d. P 0
c. P3,750,000
d.
d. P324,000
20.Compute the cost basis of the new residence if it was acquired for P5,200,000.
a. P2,000,000
b. P2,200,000
c. P1,733,333
d.
P4,333,333
21.Which is not a requisite of the wash sales rule of securities?
a. The sale or other disposition of securities resulted to a loss
b. There was an acquisition or contract or option for acquisition of stock or securities
within 30 days before the sale or after the sale.
c. The stock or securities sold were substantially the same as those acquired within
the 61-day period.
d. The seller must be a dealer in securities in a short sale transaction.
22.The following are not substantially identical securities, except one
a. Common stock and preferred stock
b. Voting and non-voting common stock
c. Bonds with different interest rates or secured and unsecured bonds
d. Similar bonds with different maturity dates
23.To which of the following is the capital gains tax required to be filed? (Select the
exception.)
a. Authorized Agent Bank under the jurisdiction of the RDO where the seller is
required to register
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