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D
Real property inventories
Land and building used in business
Vacation house of the executives
Acquired undeveloped properties
Abandoned properties
Total amount of ordinary assets
P10,000,000
3,000,000
1,500,000
500,000
600,000
P15,600,000
All properties acquired by real estate dealers/developers are ordinary assets. Ordinary assets of
realty companies that were later abandoned and become idle continue to be considered as
ordinary assets. (Rev. Reg. No. 7 03)
Problem 7 8
C
Interest in partnership
Idle raw lands
Proceeds of expropriated real property
Capital assets
P1,000,000
100,000
2,000,000
P3,100,000
P 100,000
40
P4,000,000
1,800,000
P2,200,000
2. Letter A
There is no remaining capital asset of B because the remaining 10% of one hectare is also
used into business as a warehouse.
Problem 7 10
Fair market value
Less: Book value of car
Gain on exchange
B
P190,000
150,000
P 40,000
Problem 7 11
C
There is capital loss if the property given away has fair value higher than P200,000 when it was
inherited.
Problem 7 12
Problem 7 13
D
Acquisition cost (P200,000 + P20,000)
Agents commission (P500,000 x 10%)
Deductible cost and expenses
P220,000
50,000
P270,000
Problem 7 14
A
Sales price
Less: Fair market value at the time of his fathers death
Gain on sale of farm land
P2,000,000
500,000
P1,500,000
The basis of the property shall be the fair market price or value at the date of acquisition, if the
same was acquired by inheritance. [Sec. 40 (B) (2), NIRC] The value at the date of acquisition
prevails over the fair market value because such is the lower amount.
Problem 7 15
A
Sales price
Cost or basis to the donee (the lower of donors cost or
the fair market value when the gift was made
Capital gain
P150,000
( 50,000)
P100,000
Sales price
2
Capital gain
P700,00
0
P1,000,00
0
400,00
0
600,00
0
P100,00
0
50%
P
50,000
Problem 7 17
D
Sales price
Less: Cost or market whichever is lower)
Capital gain
P200,000
100,000
P100,000
Year
Year 2
Operating income
Capital asset transactions:
Capital gain long-term (50%)
Capital loss short-term (100%)
Net capital gain (loss)
Net capital loss carry-over, limit
Taxable income
1
P200,00
0
P
25,000
( 40,000
)
(P15,000
)
P200,00
0
P300,00
0
P
20,000
( 10,000
)
P
10,000
( 10,000
)
P300,00
0
The net capital loss carry-over is limited to only P10,000 instead of P15,000 because
the net capital gains in year 2 is only P10,000.
Problem 7 19
1. Letter C
Ordinary gain
Capital asset transactions:
Short-term capital gain
Long-term capital gain (P30,000 x 50%)
Long-term capital loss (P10,000 x 50%)
Taxable income before personal exemption
2.
Letter B
Ordinary gain
Capital asset transactions:
Short-term capital gain
Long-term capital gain (P30,000)
Long-term capital loss
Taxable income before personal exemption
Problem 7 20
1. Letter C
Ordinary taxable income
Short-term capital gain (loss)
Long-term capital gain (loss) (P600,000 x 50%): (P100,000 x
50%)
P50,000
P20,000
15,000
( 5,000)
30,000
P80,000
P50,000
P20,000
30,000
( 10,000)
Year 1
P 60,000
(P400,000
)
300,000
(P100,000
)
P 60,000)
40,000
P90,000
Year 2
P180,000
P200,000
(50,000)
(60,000)
P 90,000
P270,000
2. Letter B
Ordinary taxable income
Short-term capital gain
Long-term capital (loss)
Net capital gain
Taxable income before personal exemption
Problem 7 21
Jewelry
M. Benz Car long term
(50%)
Refrigerator
Ford Car
Selling Price
P 80,000
400,000
6,000
12,000
P180,000
P200,000
(100,000)
P100,000
P280,000
Net Capital
Gain
P
69,000
15,000
1,000
(8,500)
P76,500
Problem 7 22
A
Zero. If BPI is a dealer of debt and equity securities, the transactions related to securities are
not capital asset transactions but ordinary transactions, hence there is no net capital gain.
Problem 7 23
Problem 7 24
P
5,000
12,50
0
P
17,500
P30,000
5%
P 1,500
P1,000,000
P900,000
40,000
940,000
P 60,000
30%
P 18,000
The dealers in securities are not liable to the stock transaction tax of
of 1% based on the selling price or fair market value, whichever is
Letter B
Stock transaction tax (P1,000,000 x 0.005)
3
.
P5,000
Letter C
Sales
Less: Cost of equity securities
Brokerage fee
Capital gains
Multiplied by tax rate applicable
Capital gains tax
Problem 7 26
P1,000,000
P900,000
40,000
Sold thru
stock
market
Sales price (P140 x 1,000 shares)
P140,000
Less: Cost of sales
90,000
Gross profit
P 50,000
Brokers fee (P140,000 x 1%)
( 1,400)
Percentage tax (P140,000 x 0.005)
(
700)
Capital gains tax (P50,000 x 5%)
.
Profit
P 47,900
Less: Profit if sold through the stock market
Decrease in profit
Problem 7 27
D
Capital gain (P150 P125) x 100 shares
940,000
60,000
5%
P
3,000
P
Sold direct
to the buyer
P140,000
90,000
P 50,000
( 2,500)
P 47,500
47,900
(P
400)
P2,500