INCOME TAXATION

Name:___________________________ Date:______________________
Section:__________________________ Dealings in Properties

1. Determine whether ordinary asset or capital asset.

a. Accounts Receivable
b. Securities held as investment
c. Inventories of raw materials, work in process and finished goods
d. Office equipment
e. Land used in business
f. Land help for investment purposes
g. Land for sale by a real estate dealer
h. Residential house
i. Business of sole proprietorship sold to a corporation
j. Interest of a partner in a partnership
k. Car used partly for business and partly for personal purposes

2. This is a capital asset

a. A residential land previously foreclosed by PNB and is now being offered for sale to the public
b. A commercial building foreclosed by a lending institution
c. A 10-door apartment units owned by a retired government employee
d. A residential land owned by a practicing CPA

3. An individual taxpayer owns a ten (10) –door apartment with a monthly rental of P10, 000 each residential unit.
He sold this property to another individual taxpayer. Which is not correct?
a. The seller is not liable to pay the capital gains tax.
b. The property sold is a capital asset
c. The taxpayer is engaged in business
d. The rental income is subject to income tax using the graduated rates

4. Basic rule on sale of capital assets, except

a. Sale of real property located in the Philippines by a foreign corporation is subject to 6% CGT based on selling
price or FMV, whichever is higher
b. Sale of shares of stock of a domestic corporation through the local stock exchange or initial public offering is
exempt from income tax
c. Sale of shares of stock of a domestic corporation not through the local stock exchange is subject to a final
tax of 5% for the first P100,000 capital gain and 10% for the excess
d. Sale of personal property located in the Philippines by a resident citizen is subject to the rules on holding
period

5. Holding period is the duration for which the taxpayer held the capital asset. A capital asset held by the taxpayer
for not more than 12 months is said to be
a. short-term b. medium-term c. long-term d. no-term

6. A. Capital losses are deductible from ordinary gains but net capital loss is not deductible from ordinary gains
B. Ordinary losses are deductible only to the extent of the capital gains but the net capital loss is not deductible
from ordinary gain
a. true, true b. true, false c. false, true d. false, false

7. B had an original investment in a general professional partnership of P200,000 in 2009. His share in the net
income of the partnership for 2009 credited to his capital account was P30,000. In 2010, P50,000 was credited
to his capital account as his share in the partnership income, but he withdrew P10,000 from such share. He paid
the income tax on his share in the partnership net income of 2009 and 2010. B retired at the end of 2010 and
received P300,000. Determine his capital gain or loss
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8. Where the taxpayer is a corporation, which of the following statements is true?
a. The holding period does not apply to corporation, hence, capital gains and losses are recognized at 50%
b. The net capital loss can be carried over in the next succeeding year
c. Capital loss is deductible only up to the extent of ordinary gains
d. Ordinary loss is deductible from capital gains

9. The term “capital assets” include

a. Stock in trade or other property included in the taxpayer’s inventory
b. Real property not used in the trade or business taxpayer
c. Property primarily for sale to customers in the ordinary course of his trade or business
d. Property used in the trade or business of the taxpayer and subject to depreciation

10. Where the taxpayer is a corporation, the following rules as to recognition of capital gains or losses from the
disposition of property classifies s capital asset shall apply. Which is the exception?
a. The holding period does not apply to corporations, hence, capital gains and losses are recognized at 100%
b. Capital losses are deductible only to the extent of capital gains
c. Ordinary losses are deductible from capital gains but net capital loss cannot be deducted from ordinary gain.
d. Net capital loss carry-over should not exceed the net income in the year the loss was incurred

11. The following rules as to recognition of capital gains or losses from the disposition of personal property classified
as capital asset apply where the taxpayer is an individual. Which is the exception?
a. Depending on the holding period, the percentages of gain or loss is 100% if the capital asset has been held
for 12 months or less; and 50% if the capital asset has been held for more than 12 months
b. Capital losses are deductible only to the extent of the capital gains; hence, the net capital loss is not
deductible
c. Ordinary losses are deductible from capital gains but net capital loss cannot be deducted from ordinary gain
d. Net capital loss carry over in a taxable year should not exceed the capital gain in the year the loss was
incurred.

12. Ravenclaw sold his principal residence at a selling price of P5M but with a FMV of P6M. the property sold was
acquired for P3M. He purchased his new principal residence at a cost of P7M. the capital gains tax is
a. P360,000 b. 300,000 c. 240,000 d. P0

13. How much is the basis (cost) of the new principal residence?
a. P7M b. P6M c. P5M d. P4M

14. If only P4M out of P5M was utilized in acquiring his new principal residence, the capital gain tax is
a. P80,000 b. 72,000 c. P300,000 d. P360,000

15. Using the preceding number, the basis (cost) of the new principal residence?
a. P3.2M b. P4M c. P2.4M d. P3M
b.
16. Ginny sold on February 14, 2018, 1000 shares of stock of Diagon Corporation. Diagon Corporation has 10,000
outstanding shares. The total assets and liabilities of Diagon Corporation in its latest audited financial
statements (AFS) are Php 20,000,000 and Php 5,000,000, respectively. Assume that the book value of all its
asserts and liabilities is also the market value with the exception of its real property. Supposing, the market
value of the real properties of Diagon Corporation are as follows:
Property Book Value per AFS MV for Tax Zonal Value Independent
Declaration Appraiser
Land 1 Php 2,000,000 Php 2,500,000 Php 5,000,000 Php 6,000,000
Land 2 Php 2,000,000 Php 2,200,000 Php 4,000,000 Php 3,500,000
Building 1 Php 1,000,000 Php 2,400,000 Php 3,000,000
Building 2 Php 500,000 Php 2,000,000 Php 1,950,000

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 Totals Php 5,500,000

The fair market value of the shares sold was

a. Php 2,450,000 b. Php 1,500,000 c. Php 2,000,000 d. Php 1,860,000

17. Sirius resident citizen had the following data for the years 20-A to 20-D.

20-A 20-B 20-C 20-D

Ordinary taxable Incom P200,000 P250,000 P300,000 P350,000
Gain from sale of capital assets
Held for 12 months 20,000 2,000 100,000 57,000
Held for 13 months 8,000 10,000 20,000 28,000
Loss from sale of capital assets
Held for 19 months 22,000 20,000 60,000 10,000
Held for 7 months 3,000 30,000 50,000 5,000
Statues of the taxpayer Single Married Married Married w/
w/ 1 QDC 2 QDC

Required: Compute for the taxable income of the taxpayer for the years, 20-A to 20-D

18. Peter Pettigrew, married had the following data for 2018.
Business income, gross P 200,000
Deductible expenses 120,000
Long-term capital gain 50,000
Short-term capital loss 20,000
Loss due to failure to exercise 60 days option to buy 10,000
Selling price of a partnership interest 80,000
(Investment in 2000-P50,000)
Determine the taxable income of F

19. Digory had the following transactions in Cedric Corporation’s common stock:
Oct. 10, 2018 Purchased 10,000 shares @ P50 P500,000
Oct. 20, 2018 Purchased 4,000 shares @P50 200,000
Nov. 10, 2018 Purchased 3,000 shares @ P48 144,000
Nov. 14, 2018 Sold the 10,000 shares purchased on 10/10/13 @ P45 450,000

Determine the loss sustained by Cedric and state whether it is deductible or not.

20. Rubeus Hagrid, married, had the following for 2018:

a. Business Income:
1) Rental income from real property, net of 5% W/T P285,000
Real property tax paid by the lessor 50,000
Note: the lessee reimbursed 50% of the tax, as per agreement in the lease contracr
Deductible Expense 120,000

2) Rental income from real property, net of 5% W/T P142,500

Real property tax paid by the lessor 20,000
Note: the lessee reimbursed 100% of the tax, as per agreement in the lease contract.
Deductible Expense 40,000

b. Sale of capital assets

1) Shares of ABC (domestic) not traded:
Selling price P300,000 Cost (2044) P180,000
2) Shares of DEF (domestic), traded:
Selling price P100,000 Cost (2012) P150,000
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 3) Shares of XYZ (foreign)
Selling price P500,000 Cost (2000) P100,000
4) Vacant lot
Selling price P800,000 Cost (2000) P200,000
5) Toyota car
Selling price P100,000 Cost (2000) P300,000

c. Other transactions:
1) In 2000, he purchased shares of A Corporation for P50,000 which became worthless and was written off
in 2014.
2) In 2014, he received liquidating dividend from B Corporation in the amount of P450,000. The investment
in 2000 was P300,000
Determine the taxable income of Hagrid.

21. Bartemius Crouch domestic corporation had the following data for taxable year 20-A and 20-B
20-A 20-B
Taxable income before capital asset transactions P400,000 P500,000
Gain from sale of capital assets:
Held for 12 months 20,000 23,000
Held for 9 months 5,000 10,000
Loss from sale of capital assets:
Held for 15 months 7,000 15,000
Held for 22 months 25,000 12,000

Required: Compute for the taxable net income of the corporation for the years 20-A to 20-B.

22. Godric Gryffindor had the following transactions in JKL Corporation’s common stock:
Oct. 10, 2013 Purchased 10,000 shares @P100 P1,000,000
Oct. 28, 2013 Purchased 5,000 shares @P98 490,000
Nov. 24, 2013 Sold the 10,000 shares purchased on 10/11/13 920,000
Dec. 10, 2013 Purchased 3,000 shares @P90 270,000

a. Determine the loss sustained by Godric and indicate whether it is deductible or not.
b. If the shares acquired on October 28, 2013 are sold today at Php 100 per share, determine D’s gain or loss.

23. Income from dealings in property (real, personal, or mixed) is the gain or loss deived:
a. Only form the cash sale of property
b. From cash and gratuitous receipts of property
c. From sale and lease of property
d. Only from sale of property

Answer: “D”

24. The term “capital assets” includes

a. Stock in trade or other property included in the taxpayer's inventory.
b. Real property not used in the trade or business of taxpayer.
c. Property primarily for sale to customers in the ordinary course of trade or business.
d. Property used in the trade or business of the taxpayer and subject to depreciation.

Answer: “B”

25. Under Section 39 (b) of the Tax Code, how much shall be taken into account in computing net income, if a gain is
realized by an individual taxpayer from the sale or exchange of capital assets (other than real properties and
shares of stocks) held for more than 12 months?
a. 40% of the net capital gain.
b. 50% of the net capital gain.
c. 60% of the net capital gain.
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 d. 100% of the net capital gain

Answer: “B”

26. Lots being rented when subsequently sold are classified as

a. Capital assets c. Ordinary assets
b. Liquid assets d. Fixed assets
Answer: “C”

27. The following rules shall be observed when a capital gain or capital loss is sustained by a corporation, except.
a. Capital gains and losses are recognized to the extent of its full amount.
b. Capital losses are deductible only to the extent of capital gains.
c. Net capital losses are not deductible from ordinary gain or income but ordinary losses are
deductible from capital gains.
d. There is a holding period
Answer: “D”

28. The following taxpayers consider holding period in determining the taxable capital gain or deductible capital loss
and carry-over net capital loss the following year, except -
a. Individual c. Corporation
b. Estates d. Trusts

29. Rules on capital gains and losses of corporations, except:

a. Capital gains and losses are recognized to the extent of 100% regardless of the holding period
b. The net capital loss carry over is not applicable.
c. Capital losses are deductible only to the extend of capital gains.
d. There is a final tax of 5% on real property sold.

Answer: “D”

30. Which of the following statements is incorrect?

a. Capital losses are deductible only to the extent of capital gains.
b. Ordinary losses are deductible only to the extent of ordinary gains.
c. Ordinary gains are always subject to basic tax.
d. Capital gains may be subject to basic tax.

Answer: “B”

31. In computing gain or loss from the sale or other disposition of property acquired as gift or donation, the basis of
cost shall be:
a. The fair market value as of the date of acquisition.
b. The purchase price plus expenses of acquisition.
c. The latest inventory value.
d. The same as it would be in the hands of the donor.
Answer: “D”

32. Juan received as gift from his mother propery purchased ten years ago for P100,000. At the time of donation,
the property had a fair market value of P2,000,000. After owning the property for 3 years. Juan sold them for
P2,500,000. Which of the following statements is correct?

a. The gain on the sale was a capital gain of P2,400,000.

b. The gain on the sale was an ordinary gain of P2,400,000.
c. The holding period of the asset is immaterial
d. The gain on the sale going into the net taxable income was P2,400,000.

Answer: “A”
– “ B “ is wrong. What was sold was a capital asset.
– “D” is wrong. Applying holding period, the taxable income should have been P1,200,000.

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 33. Andres inherited a piece of land from his father (purchased by the father at P5,000,000) with a fair market value
of P3,000,000 when inherited. He transferred this property to a corporation where he is in the majority
stockholder, Omega Corporation, and received for it newly issued shares of stocks with a par value of
P4,500,000 and fair market value of P5,000,000. Which of the following is wrong?

a. The gain to Andres on the transfer is P2,000,000,000.

b. The gain to Omega Corporation on the transfer is P0.
c. The basis of the shares in the hands of Omega is P5,000,000.
d. There was no gain from any and all transactions.

Answer: “D”

34. Manuel transferred his commercial land with a cost of P500,000 but with a fair market value of P750,000 to
MHD corporation in exchange of the stocks of the corporation with par value of P1,000,000. As a result of the
transfer, he became the major stockholder of the corporation. As a result fo the transfer:

a. The recognized gain is the difference between the fair market value of the shares of stocks and the
cost of the land.
b. the recognized gain is the difference between the par value of the stocks and the fair market value of
land.
c. No recognized gain because the land was in exchange of purely stocks and Manuel became the
majority stockholder.
d. No recognized gain because the land was in exchange of stocks of the corporation.

Answer: “C”

35. Emilio was a stockholder of EAC co. He owned shares of stock which he acquired five years ago at a cost of
P100,000, EAC was dissolved. He received a liquidating dividend of P140,000. The gain subject to income tax is:
a. An ordinary gain to consider is P40,000
b. A capital gain to consider is P40,000
c. A capital gain to consider is P20,000
d. No gain to consider.

Answer: “C”

36. Apol owns 51% of JJ corporation valued at P25,000,000. Due to bankruptcy, JJ was liquidated. Apol received
P20,000,000 as liquidating dividend. Was the loss deductible?
a. No, because Apol and JJ are considered related parties
b. Yes, the loss is classified as capital loss and could be deducted from capital gain, if any.
c. No, because the amount received the Apol was subject to capital gains tax.
d. Yes, because losses as a rule are deductible.
Answer: “B”

37. Pedro generated net income from trade amounting to P400,000. His capital asset transactions during 2017 are
summarized as follows:

Holding Period Amount

Capital gain 6 months P50,000
Capital gain 2 years 45,000
Capital loss 12 months 23,000
Capital loss 10 years 28,000

How much is Pedro's taxable income in 2017?

a. P484,000 c. P435,500
b. 444,000 d. 385, 500

Answer: “D”

Solution:
Income from trading activities P400,000
Add: Net Capital Gain
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 Short term capital gain @ 100% P50,000
Long term capital gain @ 50% 22,000
Short term capital loss @ 100% (23,000)
Long term capital loss @ 50% (14,000)
Net capital gain 35,000 35,500
Basic personal exemption (50,000)
Taxable Net Income P385,500

38. How much is pedros's taxable income assuming the taxable year is 2018?
a. P484,000 c. P435,000
b. P444,000 d. P385,000

Answer: “C”
-Personal exemption are no longer allowed under TRAIN Law
Taxable net income 2018== P385,500 + personal exemption = P435,500

39. Based on the above problem, assuming the taxpayer is a corporation, how much is the taxable income?
a. P484,000 c. P435,500
b. P444,000 d. P385,500

Answer: “B”
Solution:
Income from trading activities P400,000
Add: Net Capital Gain
Short term capital gain @ 100% P50,000
Long-term capital gain @ 100% 45,000
Shor term capital loss @ 100% (23,000)
Long-term capital loss @ 100% (28,000) 44,0000
Taxable Net Income P444,000

The Next six (6) questions are based on the following information:
Emilio, married, with 2 minor children, had the following date:

2016 2017
Business Income P 106,700 P 110,800
Interest on time deposit with BPI 2,000 3,000
Short-term capital gain 10,000 90,500
Long-term capital gain 20,600 80,200
Short-term capital loss 90,000 20,900
Long term capital loss 80,400

142. How much is the taxable income of Emilio for year 2016?
a. P6,700 c. P106,700
b. P56,700 d. nil

Answer: “A”

Solution:
Business income P106,700
Add: Net Capital gain
Short-term capital gain @ 100% P10,000
Long-term capital gain @ 50% 10,300
Short-term capital loss @ 100% (90,000)
Long-term capital loss @ 50% (40,200)
Net capital loss (P109,900)
Less: personal exemption
basic personal exemption (50,000)
Additional personal exemption (P25,000 x 2) (50,000)
Taxable net income P6,700

– Apply the rules on holding period if the taxpayer is individual

– capital losses are deductible only to the extend of capital gains.
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 – Personal exemptions are allowable deductions pior to TRAIN Law
– The interest income of BPI is subject to FWT

40. How much is the taxable income of Emilio for the year 2017?
a. P13,800 c. P113,800
b. P110,800 d. 260,600

Answer: “C”
Solution:
Business income P110,800
Add: Net capital gain
Short-term capital gain @ 100% P90,500
Long-term capital gain @ 50% 40,100
Short-term capital loss @ 50% (20,900)
Long-term capital loss @ 100% P109,700
Net Capital Gain (6,700) 103,000
Less: net capital loss carry-over (2016)
Less: Personal exemptions
Basic personal exemption (50,000)
Additional Personal exemption (P25,000 x 2) (50,000)
Taxable net income P113,800
– Capital loss carry-over should not exceed the net taxable income during the year the net capital loss was
incurred.

41. How much is the taxable income of Emilio assuming the current taxable year is 2018?
a. P13,800 c. P213,800
b. P110,800 d. P260,600

Answer: “C”
Solution:
Business Income
Add: Net capital gain P110,800
Short-term capital gain @ 100% P90,500
Long-term capital gain @ 50% 40,100
Short-term capital loss @ 100% (20,900)
Net Capital Gain P109,000
Less: net capital loss carry-over (2017) (6,700) 103,000
Less: Personal exemptions
Basic personal exemption -
Additional Personal exemption -
Taxable net income P213,000
- The rule on capital loss carry-over is not affected under TRAIN Law
- Personal exemptions are no longer allowed as deductions from the gross income upon effectivity of the TRAIN
Law

42. IF the taxpayer is a corporation, how much is the taxable income for the year 2016?
a. P6,700 c. P106,700
b. P56,000 d. nil

Answer: C
Solution:

Business Income
Add: Net capital gain P106,700
Short-term capital gain @ 100% 10,000
Long-term capital gain @ 100% 20,000
Short-term capital loss @ 100% (90,000)
Long-term capital loss @ 100% (80,400)
Net Capital Loss (139,800) ________
Taxable net income P106,000
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 - the rules on holding period and net capital loss carry-over are not applicable to corporate taxpayers.
43. If the taxpayer is a corporation, how much is the taxable income for the year 2017?
a. P13,800 c. P113,800
b. P110,800 d.P260,000

Answer: D
Solution:

Business Income
Add: Net capital gain P110,800
Short-term capital gain @ 100% P90,500
Long-term capital gain @ 100% 80,200
Short-term capital loss @ 100% (20,900) 149,800
Taxable net income P106,000

44. If the taxpayer is a corporation, how much is the taxable income assuming the current taxable year is 2018?
a. P13,800 c. P113,800
b.P110,800 d. P260,600

Answer: D; Same solution with the immediately preceding number

45. Jose has the following information in 2017:

Gross profit from sale of inventories held for 2years 500,000
Loss on two (2) weeks option contract 50,000
Gain on sale of bonds (holding period 6months) 60,000
Gain on sale of delivery truck held for 3 ½ years 400,000
Gain on sale of personal car held for 5 years 160,000
Capital gain on direct sale to buyers of shares of stocks held 40,000
for 4 years
Sale of 2-year old residential house (Cost: P540,000) 5,500,000
In 2016, Jose had a net taxable income of P50,000 and a capital loss of P75,000.
How much is the taxable net income?
a. P415,000 c. P890,000
b. P490,000 d. 940,000

Answer: C
Solution:
Gross profit from sales of inventories 500,000
Gain on sale of delivery truck 400,000
Loss on option contract = @100% (50,000)
Gain on sale of bonds = @100% 60,000
Gain on sale of personal car = P8k x 50% 80,000
Net Capital Gain 90,000
Less: Net capital loss carry-over (50,000) 40,000
Basic personal exemption
(Allowed prior to TRAIN Law) (50,000)
Taxable net income 890,000

46. How much is the taxable net income assuming the current taxable year is 2018?
a. P415,000 c. P332,000
b. P490,000 d. P940,000

Answer: D
• Personal exemption is no longer deductible under the TRAIN Law
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 • Taxable Net Income = 890,000 (with personal exemption) + 50,000 = P940,000
• Capital loss carry-over should not exceed the net taxable income during the year the net capital was
incurred.

47. How much is the total capital gains tax?

a. P2,000 c. P332,000
b. P166,000 d. P336,000

Answer: C
Solution:
CGT
On sale of shares of stock = P40,000 x 5% P2,000
On sale of residential house = P550,000 x 6% 330,000
TOTAL CGT 332,000

48. How much is the total capital gains tax assuming the current taxable year is 2018?

a. P2,000 c. P332,000
b. P166,000 d. P336,000

Answer: D
Solution:
CGT
On sale of shares of stock = P40,000 x 5% P6,000
On sale of residential house = P550,000 x 6% 330,000
TOTAL CGT 336,000
– CGT on shares of stock under the TRAIN Law is 15% of the capital gain
–

49. Juan, a Filipino citizen, migrated to the United States some eight (8) years ago and got a permanent resident
status or green card. He should pay his Philippine income taxes on:
a. The gains derived from the sale in California, USA of jewelry he purchased in the Philippines
b. The proceeds he receive from a Philippine insurance company as the sole beneficiary of life insurance
taken by his father who died recently
c. The gains derived from a the sale in New York Stock Exchange of shares of stock in PLDT, a Philippine
corporation
d. Dividends received from a two year old foreign corporation whose gross income was derived solely
form the Philippine source

Answer: C
• “A” is income earned in USA
• “B” is a tax-exempt income
• “C” gain on sale of shares of DC is always considered an income in the Philippines
• “D” is a dividend income earned outside of the Philippines

50. Statement 1: Gain on sale of all kinds of capital assets are subject to the final tax on capital gain.
Statement 2: Gain from sale of real property classified as capital asset and located in Miami, Florida is not subject to
the final tax on capital gain.
a. Both statements are correct
b. Both statements are not correct
c. Only the first statement is correct
d. Only the second statement is correct

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 Answer: D
- Gain on sale of capital assets may be:
◦ Subject to capital gain tax
◦ Subject to basic income tax
◦ Exempt from income tax but subject to stock transaction tax (section 127 of the Tax Code, as
amended)

51. In 2016, Mr. Vicente Tagle, a retiree, bought 10,000 CDA shares that are unlisted in the local stock exchange for
P10 per share. In 2010, the said shares had a book value per share of P60 per share. In view of a car accident in
2010, Mr. Vicente Tagle had to sell his CDA shares but he could sell the same only for P50 per share. The sale is
subject to tax as follows:
a. 5%/10% capital gains tax on the capital gain from sale of P40 per share (P50 selling price less P10 cost)
b. 5%/10% capital gains tax on the capital gain of P50 per share, arrived at by deducting the cost (P10 per share)
from the book value (P60 per share)
c. 5%/10% capital gains tax on the capital gain from sale of P40 per share (P50 selling price less P10 cost) plus
donor's tax on the excess of the fair market value of the shares over the consideration.
d. Graduated income tax rates of 5% to 32% on the net taxable income from the sale of the shares

Answer: C
• Prior to 2018 sales of shares of domestic corporation not listed on the local stock exchange is subject to
CGT as follows:
-5% on first P100,000 capital gain
-10% in excess of 100,000 capital gain
• The excess of FMV over consideration received is considered donation subject to donor's tax

52. The sale in the immediately preceding number, in case the taxable year is 2018, is subject to:
a. 15% capital gains tax on the capital gain from sale of P40 per share (P50 selling price less P10cost)
b. 15% capital gains tax on the capital gain of P50 per share, arrived at by deducting the cost (P10 per share)
from the book value (P60 per share)
c. 15% capital gains tax on the capital gain from the sale of P40 per share(P50 selling price less P10 cost) plus
donor's tax on the excess of the fair market value of the shares over consideration
d. The revised graduated income tax rates of 20% to 35% on the net taxable income from sale of the shares

Answer: C
• Beginning January 1, 2018 (TRAIN Law), sale of shares of domestic corporation not listed in the local
stock exchange is subject to 15% CGT based on capital gain.

53. Assume the shares sold were from a foreign corporation, the sale is subject to:
a. 5%/10% capital gains tax on the capital gain from sale of P40 per share (P50 selling price less P10 cost)
b. 15% capital gains tax on the capital gain from sale of P40 per share (P50 selling price less P10 cost)
c. Stock transaction tax of ½ of 1% of gross selling price
d. Basic income tax

Answer: C
• Gain on sale of shares of foreign corporation is subject to basic income tax.

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