Key Answer Chapter 6.

Capital Gains Taxation MC Problems Part 1:

MC Theories Part 1: 1. A, 200,000 – 5,000 – 8,000 = 187,000 x 15% =

28,050
1. B 8. C
2. A, 70,000 x 15% = 10,500
2. A 9. D
3. D, 320,000 x 15% = 48,000
3. B 10. A
4. D, not a domestic stock
4. D 11. C
5. D, 150,000 x 15% = 22,500
5. D 12. D
6. A, DST: 300,000/200 x 1.50 = 2,250
6. C 13. A
CGT: 500,000 – 350,000 – 2,250 = 147750 x 15% =
7. A 14. D or C
22,163.

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15. C
7. B. 350,000 -500,000 = 50,000 x 15% = 7,500

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MC Theories Part 2:
8. A, because stock dealer

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1. D 10. B
9. Answer is 1,500.
2. A rs e
11. D
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Selling Price 92,000
3. D 12. C
Cost (FIFO) (40,000)
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4. D 13. A
20,000/30,000 x 63,000 (42,000)
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5. C 14. C
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Gain 10,000 x 15% = 1,500

6. A 15. B
10. D, 40,000 + 63,000 = 103,000/50,000 =2.06 x
7. C 16. A 40,000 = 82,400 (cost); 92,000 – 82,400 = 9,600 x
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15% = 1,440
8. D 17. B
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11. D, the taxpayer is a dealer in securities, hence, he

9. C is not liable to CGT but RIT. Likewise, wash sale is not
MC Theories Part 3 applicable to dealer in securities. It is not a
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deductible capital loss but an ordinary loss, an

1. A 8. D allowable deduction.
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2. C 9. C 12. B
3. A 10. D Sale (10,000 x 32) P 320,000
Cost (2,000 X 30) + (8,000 x 25) (260,000)
4. B 11. A
Gain P 60,000
5. C 12. B
13. A, P 120,000 – 10,000 + 250,000 = 360,000 x
6. D 13. D 15% = 54,000
7. A 14. D
14. B, this is an example of wash sale of securities,
15. A full replacement of shares sold at loss. Hence, the

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 loss of 20,00 shall be part of the cost of the CGT (298,500 x 15%) P 44,775
replacement shares.
4. A
240,000 + (100,000-120,000) = 260,000 5. C, this is partial replacement of shares; total
amount of loss shall be allocated between deductible
15. A, because it is subject to STT. loss and deferred loss. Deductible loss pertains to
16. A, subject to STT. unreplaced portion of the shares while the deferred
loss pertains to the replaced portion of the shares.

Deductible loss (5,000 / 20,000 x 40,000) P 10,000

MC Problems Part 2: Deferred loss (15,000 / 20,000 x 40,000) 30,000
1. A, P 4,000 Total loss P 40,000

Loss on sale, 4/5/2020 (100,000 – 112,000)

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6. Cost of 15,000 shares (15,000 x 12) P 180,000

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(P12,000) Deferred loss 30,000

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Adjusted cost of 15,000 shares P 210,000

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After the loss incurred, the company partially
replaced the shares on 5/1/2020 which is within 30 7. C

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days after 4/5/2020, hence a wash sale of securities. SP (1,500 shares x 120) P 180,000
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On June 7, 2020, the company sold the replaced Cost (1,500 sh x 90) 135,000
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shares. Hence, the adjusted cost of shares bought on Doc stamp (1500 x 85/200 x 1.50) 956
5/1/2020 is: Net gain P 44,044
CGT: (44,044 x 15%) P 6,607
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Purchase cost of 8,000 shares 80,000

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Deferred loss (8/10 x 12,000) 9,600 8. A

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Adjusted cost 89,600 7,500 = 1.50 x PV/200

1.50PV/200 = 7500
89,600/ 8,000 shares = Unit cost = P 11.2 1.50PV = 1,500,000
PV = 1,000,000 x 1.5 = 1,500,000 Cost
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Sale 60,000 1,500,000 x 2 = SP of 3,000,000

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Cost of shares (5,000 x 11.2) (56,000)

Gain 4,000 9. CGT:
SP 3,000,000
2. C Cost 1,500,000
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SP 500,000 Doc stamp 7,500

Less: Cost 200,000
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Commission 10,000
Gain 300,000 Gain 1,482,500 x 15% = 222,375
CGT (300 T x 15%) 45,000
10. A
Initial Payment (10% x 500,000) + 50,000 = 100,000 CGT: 140,000 x 15% = 21,000
Installment CGT: 100,000/ 500,000 x 45,000 = 9,000 Surcharge: 21,000 x 25% = 5,250
Interest: 21,000 x 12% x 3/12 = 630
3. B Total: 26,880

Selling Price P 300,000 MC Problems Part 3:

Doc stamp (200,000/200 x P 1.50) 1,500
Net gain P 298,500 1. A, future plant site is an ordinary asset.

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 2. D. can be reclassified provided not engaged in Tax basis of Mr. Eller P 1,000,000
real estate business. Less: Cash/property received 200,000
Gain to be recognized by the transferor 200,000
3. C, 3.2 M x 6% = 192,000 Basis of the new shares received P 1,000,000
4. A, parking lot is an ordinary asset, not subject to
5. C, On the part of the transferee:
CGT.

5. D, 2,500,000 x 6% = 150,000 Original basis in the hands of the transferor P 1M

Add: Gain to be recognized to the transferor 200T
6. C, 1M x 1.8M/ 2M = 900,000 Basis of the shares received by the transferee 1.2M
7. B, 150,000 – (200,000/2,000,000 x 150,000) =
6. D, exchange not solely in kind, thus gain to be
135,000 recognized.
8. D, 1.5M + (5,000 x 500) x 6% = 240,000
Selling price (1,100,000 + 250,000) P 1,350,000

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9. D, 13M x 6% Cost ( 1,200,000)

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Gain P 150,000
10. D, exempt

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X 15% CGT P 22,500

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11. B, 12,000 x 6% = 720,000 x 3M/10M = 216,000
Gain is less than the cash or property received, thus
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12. B, 12M/1,000 x 15 = 180,000 the whole 150,000 shall be recognized.
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7. B (Transferor)
MC Problems Part 4: Tax basis of the shares exchanged P 1,200,000
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Less: property received 250,000

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1. A, this is a tax-free exchange. Mr. Quirino, upon Gain to be recognized 150,000

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exchange, will acquire controlling interest over the Tax basis of the shares received P 1,100,000
corporation. No gain or loss is recognized.
8. C, 250,000 – “boot” means the fair value of the
2. B, the basis the cost (tax basis) of the shares cash or property received.
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given up.
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9. D, (Transferee)
3. C, it deals with exchange not solely in kind, an Original basis in the hands of the transferor P 1.2M
exception to the tax-free exchange. Add: Gain recognized to the transferor 150T
Basis of the shares P 1.35M
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SP (1,300,000 + 200,000) P 1,500,000

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Cost 1,000,000 10. P 225,500

CGT: 2,500,000 x 6% = 150,000
Indicated gain P 500,000 Compromise penalty 20,000
However, the whole amount is not subject to CGT Surcharge (150,000 x 25%) 37,500
Interest (150,000 x 12%) 18,000
because the gain to be recognized shall up to the
Total due 225,500
extent of the cash or property received which is P
200,000. 11. C
CGT: 200,000 x 15% = 30,000 9,000 = 15x/1,000
15x = 9,000,000
4. B, On the part of transferor: X = 600,000 (value of the property)
CGT: 600,000 x 6%

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 CGT = 36,000

12. B
CGT: 4M x 6% 240,000
Doc stamp (4M/1T x 15) 60,000
Total tax due 300,000

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