This document defines capital assets and ordinary assets for tax purposes. Capital assets are all property other than ordinary assets, which include inventory, depreciable business property, real estate used in a trade or business, and certain other assets. The document outlines the tax treatment of capital gains and losses, including how much of gains and losses from assets held over and under one year are taxed, carryover rules for net capital losses, and several exceptions.
This document defines capital assets and ordinary assets for tax purposes. Capital assets are all property other than ordinary assets, which include inventory, depreciable business property, real estate used in a trade or business, and certain other assets. The document outlines the tax treatment of capital gains and losses, including how much of gains and losses from assets held over and under one year are taxed, carryover rules for net capital losses, and several exceptions.
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Attribution Non-Commercial (BY-NC)
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This document defines capital assets and ordinary assets for tax purposes. Capital assets are all property other than ordinary assets, which include inventory, depreciable business property, real estate used in a trade or business, and certain other assets. The document outlines the tax treatment of capital gains and losses, including how much of gains and losses from assets held over and under one year are taxed, carryover rules for net capital losses, and several exceptions.
Direitos autorais:
Attribution Non-Commercial (BY-NC)
Formatos disponíveis
Baixe no formato DOC, PDF, TXT ou leia online no Scribd
1. Definitions - No defnton n the Code for capta assets. Ony Ordnary assets are defned a. ORDINARY ASSETS: (a) stock n trade of taxpayer (b) property whch woud propery be ncuded n an nventory of the taxpayer, f on hand (c) merchandse nventory (d) deprecabe assets used n the trade/busness (e) rea property used n trade/busness b. CAPITAL ASSETS - property hed by the taxpayer (whether or not connected wth hs trade or busness) Hence, capta assets are property of a taxpayer other than ordnary assets. c. NET CAPITAL GAIN - gans > oss from saes/ exchanges of capta assets d. NET CAPITAL LOSS - oss > gans from saes/ exchanges of capta assets 2. Percentage taken into account Taxpayer other than a corporaton (Indvduas, estates and trusts) - - 100% f the capta asset s hed for more than 12 months - - 50% f the capta asset s hed for ess than 12 months - Note: GR: for purposes of computng capta oss and capta gan, the actual holding p!iod s taken nto account. Excepton: If securities become worthless durng the taxabe year and are capta assets, the oss resutng therefrom sha be consdered as a oss from the sae or exchange, on the ast day of such taxabe year, of capta assets. 3. Limitation on Capital Loss Aowed ony to th "tnt o# th gain$ from such saes or exchanges, hence, the net capta oss s not deductbe. Exampe: Gans P 5,000 Losses 15,000 NCL P10,000 In ths case, ony P5,000 can be camed as deducton (to the extent of the gan) E"cption: Losses from such sae ncurred by a do%$tic ban&'t!u$t co. substanta part of busness s recept of deposts, se any bond, debenture, note or certfcate or other evdence of ndebtedness ssued by any corp, w/ nt. coupons or n regstered form (ncudng one ssued by the government or potca subdvson) 4. Net Capital Loss Carry-over a. Corporatons cannot carry over a net capta oss b. If net capta oss s sustaned n any taxabe yr., such oss s treated n the succeedng taxabe yr. as a oss from the sae/exchange of a capta asset hed for not more than 12 mos. (100% deducton) c. Such net capta oss that shoud be carred over $hould not "cd th nt inco% #o! th (a! Incu!!d )p!io! (a!*$ nt inco%+ d. Exampe: NI n 1996 = P6,000 NCL n 1996 = 10,000 treated as a oss n 1997(100%) = P6,000 ony snce t shoud not exceed the net ncome of the taxabe yr. w/c the oss was ncurred Net ncome shoud be understood as TAXABLE ncome accordng E.O. 37 5. etirement of !on"s# De$entures# Notes or Certificates or ot%er evi"ences of in"e$te"ness Tax Base: A%ount !ci,d by the hoder for such transacton These transactons resut n capta gan or oss athough there s no sae of capta assets &. 'ain or Loss from (%ort (ales of Property a. Consdered as gans & osses from saes/exchanges of capta assets b. Gans & Losses attrbutabe to faure to exercse prveges or optons to buy or se property = capta gans/osses Note: Short sae s a transacton n whch the seer ses securtes whch he does not own and, therefore, cannot hmsef suppy the securtes for devery, n expectaton of the decne n ther prce. Opton to buy or se property: Exampe: Suppose X Inc. owns rea property worth Php 10 M. Y gves X Inc. Php 2M as opton money for a 2-year opton perod. Before the 2 year perod ends, Y exercsed the opton and bought the property. What w the tax treatment? It w be sub|ect to 6% capta gans tax under Secton 27 (D) (5). Secton 39 (F) or the provson on the faure to exercse prvege w not appy. Suppose the same stuaton above but Y fas to exercse hs opton. What w be the tax treatment? In that case, the opton money w be a capta gan for X and a capta oss for Y. Note: the property sub|ect of opton need not be a capta asset. The aw does not say f t shoud be an ordnary or capta asset. It ony says "attrbutabe to a property." -. DETER.INATION O/ A.O0NT & RECOGNITION O/ GAIN OR LOSS 1. Computation of 'ain or Loss a. GAIN = amt. reazed > bass/ad|usted bass for determnng gan (n other words, seng prce or proceeds > cost) b. LOSS = bass/ad|usted bass for determnng oss > amt. reazed (cost > seng prce/proceeds) c. AMOUNT REALIZED = money receved + far market vaue of the property (other than money, f any) receved .od o# Ac1ui$ition !asis #o! dt!%ining gain'lo$$ #!o% $al'di$po$ition o# p!op!t( Purchase co$t of property acqured on/after 3/1/1913 Inhertance #ai! %a!&t ,alu as of the date of acquston (at the tme of death) Gft the co$t to the donor or to the prevous owner who dd not acqure t by gft; BUT, f such bass > FMV at the tme of the gft, the bass sha be such FMV for the purpose of determnng the oss Acqured for less than adequate consideration a%ount paid b( th t!an$#! f property acqured where G/L s not recognzed Sa% a$ th ba$i$ o# p!op!t(2 $toc&'$cu!iti$ "changd (1) increased by: dvdends amt. of any gan recognzed by the exchange (2) decreased by: money receved far market vaue of the other property receved abty assumed by the transferee 2. )*c%ange of property a. GENERAL R0LE: the nti! a%ount of the gan or oss sha be recognzed upon the sae or exchange of property b. E3CEPTION: no gain o! lo$$ s recognzed (tax-free exchanges) (1) If n pursuance to a pan of %!g! o! con$olidation (a) a corporaton exchanges property solely for stocks n a corp. (both partes to merger/consodaton) (b) sharehoder exchanges stock n a corp. for the stock of another corp. (both corps. are partes to the merger/consodaton) (c) securty hoder of a corp. exchanges hs securtes n such corp. soey for stock or securtes n another corp. (both corps. are partes to the merger/consodaton) (2) If property s t!an$#!!d to a co!p. b( a p!$on n exchange for stock/unt of partcpaton n such corp. of w/c a$ a !$ult of such exchange such person, aone/together w/ others, not exceedng 4 persons, gains control o# $aid co!p. (stocks ssued for servces sha not be consdered as ssued n return for property) o Contro s ownershp of stocks n a corporaton possessng at east 51% of the tota votng power of a casses of stocks entted to vote. BASIS: same as the bass of property, stock/securtes exchanged (a) decreased by: money receved far market vaue of the other property receved (b) ncreased by: amount treated as dvdend amount of any gan recognzed by the exchange property receved as boot sha have the FMV as bass f part of the consderaton to the transferor, the transferee of property assumes a abty of the transferor/acqures from the atter property sub|ect to a abty, such assumpton sha be treated as money receved by the transferor on the exchange f transferor receves severa knds of stock/securtes, Commssoner s authorzed to aocate the bass among the severa casses of stocks/securtes bass of the prop. transferred n the hands of the transferee: same as woud be n the hands of the transferor ncreased by the amt. of the gan recognzed to the transferor on the transfer Not: - Transferors bass s Secton 40 (C) (5) (a) whe transferees bass s Secton 40 (C) (5) (b). - Boot s any cash or property gven n addton to the shares of stock receved by a transferor n a tax-free exchange. - When there s no boot, the bass s the transferors property gven up because the rues provded that the bass woud be the same bass as the property gven up by the transferor. In ths knd of transacton, the rue s aways the transferors bass. - When there s boot, the bass s the same as transferors bass mnus boot ncreased by the recognzed gan.