MODULE 3

Special Income
Taxation
Prepared by Mrs. Nelia I. Tomas, CPA, LPT

INCOME TAXATION Laws. Principles and Applications 2019 OBE Edition by Rex B. Banggawan
Final Income Taxation
Part 1
Learning Objectives
After completing the lesson, the students will be able to

01 Understand the features of final income taxation

02 Identify the passive income subject to final tax

03 Discuss the final tax on individuals and corporations

04 Determine the different final tax rates

05 Compute for the final tax on certain passive income

06 Fill out the final withholding tax return

Features of Final Income Taxation
1. Final Tax
2. Tax withholding at source
3. Territorial Imposition
4. Imposed on certain passive income and persons not engaged
in business in the Philippines
 Features of Final Income Taxation
The Final Withholding System
 Withholding tax agent has the responsibility to
withhold the income tax payments.
 Tax deducted at source is final.
 Inherently territorial and applies only to certain
passive income earned in the Philippines
Rationale of Final Income Taxation
 Built upon the taxpayer and government convenience. It
relieves the taxpayer of the obligation to file an income
tax return. For the government, it is the most convenient
and effective system in collecting taxes on income where
there is high risk of non-compliance or tax evasion.
 Under the NIRC, the final income tax is imposed on
certain passive income and upon non-resident persons
not engaged in business in the Philippines.
Passive Income
Items of passive income are earned with very
minimal involvement from the taxpayer and are
generally irregular in timing and amount.
Non-resident Person Not Engaged in Business
or Trade
Non-resident aliens not engaged in trade or business
and non-resident foreign corporations have high risk
of non-compliance.
The law subjects them to final income tax
a. Non-resident alien not engaged in trade or
business – 25%
b. Non-resident foreign corporation – 30%
 Passive Income Subject to Final Tax

Interest or yield from bank Interest income on tax-free

01 09 corporate covenant bonds
deposits or deposit substitutes

Domestic dividends, in general 02 08 Informer’s Reward

Dividend income from a Real 07 Winnings

Estate Investment Trust 03

Share in the net income of a

business partnership, taxable 04 06 Prizes exceeding P10,000
associations, joint ventures,
joint accounts or co-ownership

05 Royalties, in general
 Interest Income or Yield
Interest income or yield from local currency bank deposits or deposit
substitutes are subject to final tax as follows:
a. Short-term deposits - are those made for a period of less than 5 years.
Individuals - 20%
Corporations – 20%

b. Long term deposits/investment certificates - refer to certificate of time

deposit or investment in the form of savings, common or individual trust funds,
deposit substitutes, investment management accounts, and other investments
with a maturity of not less than five years, the form of which shall be prescribed
by the BSP and issued by banks only to individuals in denominations or P10,000
and other denominations as may be prescribed by the BSP. (RMC 18-2011)
Individuals - Exempt
Corporations – 20%
 Tax on Pre-termination of Long-term deposits of Individuals
If the deposit or investment placement of individual taxpayers is pre-determined before
5 years, any previously untaxed or exempted interest income will be subjected to the
following final taxes upon pre-termination:
Holding period Final tax
Less than 3 years 20%
3 years to less than 4 years 12%
4 years to less than 5 years 5%
5 years or more 0%
The final tax is limited to banks and shall not be applied with time and savings account
deposit maintained by members with cooperatives and by primary cooperatives with their
federations.
Other Application of the Final Tax on Interest
1. Deposit substitute
2. Government securities
3. Money market placements
4. Trust funds
5. Other investments evidenced by certificates prescribed by the BSP
Foreign Currency Deposit with
Foreign Currency Depositary Banks
The interest income from foreign currency
deposits under the foreign currency deposit
system or expanded foreign currency
deposit system by residents (individuals or
corporations) is subject to a final tax of 15%.

If the bank account is jointly in the name of

a non-resident and a resident taxpayer, 50%
of the interest shall be exempt while the
other 50% shall be subject to the 15% final
tax.
.
 Dividends
Dividends means any distribution made by a corporation to its shareholders out of its
earnings or profits and payable to its shareholders, whether in money or in other property.

Types of Dividends

Cash dividends Liquidating dividends

Property dividends Scrip dividends Stock dividends

As a rule, dividends are income subject to tax except for liquidating dividends and stock
dividends.
 Liquidating Dividends
Under the rule, is not viewed as income but as
exchange of properties. When liquidating dividends
exceed the cost of the investments, the excess is a
taxable capital gain, subject to regular income tax.

Stock Dividends
It represents transfer of surplus to capital
account shall not be subject to tax. However,
stock dividends become taxable when:
 If the corporation cancels or redeems stock
issued as a dividend immediately after the
declaration of stock dividends.
Dividends  If the declaration of stock dividends leads to
substantial alteration in ownership in the
corporation or when the corporation declared
an optional stock or cash dividend
 If the stock distributed as dividends is of
another corporation
 Dividends Tax Rules
Recipients of dividends
Source of Dividends Individuals Corporations
Domestic corporation 10% final tax1 Exempt2
Foreign corporation Regular tax Regular tax
1. NRA-ETB is subject to a 20% final tax and the NRA-NETB is subject to a 25% final tax.
2. NRFC is not exempt, instead subject to 30% general final tax rate. However, the imposable
dividend tax shall be 15% when tax sparing rule applies.

Exempt Dividends
1. Inter-corporate Dividends
2. Dividends from Cooperatives

Entities Taxable as Corporations Are Subject to 10% Final Tax

a. Real Estate Investment Trusts (REIT)
b. Business partnerships
c. Taxable Associations
d. Taxable Joint ventures, joint accounts or consortia
e. Taxable co-ownerships
 Royalties on Passive Income
Passive royalty income received from sources within the Philippines is subject to the followi
ng final tax rates:

Recipient
Source of Passive Royalties Individuals Corporations
Books, literary works and musical compositions 10% final tax 20% final tax
Other sources 20% final tax 20% final tax

1. Royalties on books sold on e-copies or CDs, such as e-books are subject to the 20%
final tax.
2. Royalties on cinematographic films and similar works paid to NRA-ETBs, NRA_NETBs
or NRFC is subject to a final tax of 25%.
3. Royalties from active income is subject to regular income tax.
 Taxable Prizes
Recipient
Amount of Taxable Prize Individuals Corporations
Prizes exceeding P10,000 20% final tax Regular tax
Prizes not exceeding P10,000 Regular tax Regular tax

Exempt Prizes
1. Prizes received by recipient without any effort on
his part to join a contest. Examples prizes from
awards as Nobel Prize, Most Outstanding Citizen,
Most Benevolent Citizen of the year.
2. Prizes from sports competitions that are
sanctioned by their respective national sports
organizations.
Requisites of Exemption
Prizes 1. The recipient was selected without any action on
his part to enter the contest.
2. The recipient is not required to render substantial
future services as a condition to receiving the
price or reward.
 Winnings
Recipient
Types of Winnings Individuals Corporations
PCSO/lotto winnings not exceeding P10,000 Exempt Exempt
PCSO/lotto winnings exceeding P10,000 20% final tax 20% final tax
Other winnings, in general 20% final tax Regular tax
Note: PCSO or Lotto winnings of NRA-NETB and NRFCs, regardless of the amount, are subject to 25%
to 30% final tax, respectively.

Examples:
1. Mr. A won P10,000 in a singing contest – Singing contest is based on effort, thus, the P10,000 is a
prize that is not subject to 20 final tax because it is within the threshold. Instead, Mr. A shall report the
prize in his regular income tax return.
2. Mr. A won P10,000 in a raffle draw organized by Z Mall – Raffle draw winnings is based on chance
thus, the P10,000 is a winnings that is subject to 20% final tax. Z Mall shall withhold the 20% final tax.
Mr. A shall receive the prize net of final tax.
3. Mr. A made 2 bets in PCSO lotto draws. Both won. The 1st winning is P5,000 and the 2nd winning is
P15,000. The 1st winning is exempt from tax while the 2nd winning is subject to 20% final tax.
 Tax Informer’s Rewards
01 Definition
A cash reward may be given to any person
instrumental in the discovery of violations
on the National Internal Revenue Code or
discovery and seizure of smuggled goods.
The reward is subject to 10% final tax.
03 Amount of Cash Reward
whichever is lower of the following per case:
1. 10% of revenues, surcharges or fees recovered
and or fine or penalty imposed and collected.
2. P1,000,000

02 Requisites of Tax Informer’s Reward

1. Definite sworn information which is not yet in the possession of the BIR.
2. The information furnished lead to the discovery of fraud upon internal revenue laws or
provisions thereof.
3. Enforcement results in recovery of revenues, surcharges, and fees and/or conviction of the
guilty party or imposition of any fine or penalty.
4. The informer must not be a:
a. BIR official or employee
b. Other public official or employee
c. Relative within the 6th degree of consanguinity of those officials or employee in a and b.
 Tax-Free Corporate Covenant Bonds
Bond Investor
Individuals Corporations
Tax on interest income on tax-free corporate 30% final tax Regular income
covenant bonds tax
The final tax applies to all individuals, regardless of classification.
 Exceptions to the General Final Tax on Non-Resident Persons
Not Engaged in Trade or Business in the Philippines
NRA-NETB NRFC
General Final Tax Rate 25% 30%
Exceptions:
 Capital gain on sale of domestic stock 15% Capital gains tax 15% Capital gains tax
directly to buyer
 Rentals on cinematographic films and
similar works 25% of rentals 25% of rentals
 Rentals of vessels 25% of rentals 4.5% of rentals
 Rentals of aircrafts, machineries, and other
equipment 25% of rentals 7.5% of rentals
 Interest income under the foreign currency
deposit system Exempt Exempt
 Interest on foreign loans N/A 20%
 Dividend income 25% 15% if tax sparing rule
is applicable
 Tax on corporate bonds 30% 30%
 Tax Sparing Rule
NRFCs shall be subject to a 15% tax on dividend income instead
of the 30% general final tax if the country of domicile of the NRFC
credit against the tax due of such NRFC taxes presumed to have
been paid by such NRFC from the Philippines equivalent to 15%
of the dividends. The requirement of tax sparing rule is deemed
satisfied if the country to which the NRFC is domiciled imposes no
tax on dividends from foreign sources.

Exceptions to the Capital Gains Tax

General Final Tax on As a rule, NRA-NETBs and NRFCs do
not file income tax returns. Exceptionally,
Non-Resident Persons they are required to file income tax
Not Engaged in Trade returns to report their gain from dealings
in domestic stocks directly to buyers.
or Business in the
Philippines
Final Withholding Tax Returns
The final withholding tax returns (BIR Form 0619-F), Monthly
Remittance Return of Final Income Taxes Withheld, shall be
filed in triplicate by every withholding agent or payor who is
either an individual or corporation for the first two months of the
quarter.

Deadline and Place for Monthly Filing

The return shall be filed and the tax shall be paid or before the
10th day of the month following the month in which withholding
was made with:
a. The authorized agent bank of the revenue district office
having jurisdiction over the withholding agent’s place of
business.
b. In places where there are no authorized agent banks, to
the revenue collection officer.
c. The authorized city or municipality treasurer within the
revenue district where the withholding agent’s place of
business in located.
Final Withholding Tax Returns
 Monthly Deadline for eFPS Filing
In accordance with the schedule set forth in RR No. 26-
2002, the deadline for e-filing of returns is as follows:
Group A – 15 days following the end of the month
Group B – 14 days following the end of the month
Group C – 13 days following the end of the month
Group D – 12 days following the end of the month
Group E – 11 days following the end of the month

 Quarterly Filing
The withholding agent shall file (BIR Form 1601-FQ),
Quarterly Remittance Return of Final Income Taxes
Withheld, on or before the last day of the month after
each quarter.
Capital Gains Taxation
Part 2
Learning Objectives
After completing the lesson, the students will be able to

01 Understand the features of capital gains taxation

02 Identify the classification of taxpayer’s properties

03 Enumerate the capital gains subject to capital gains tax

04 Discuss the tax on sale of domestic stocks through the PSE

05 Compute for the capital gains tax on certain capital gains

06 Understand capital gains tax exemption under special laws

 Classification of Taxpayers’ Properties
1. Ordinary Assets – assets used in business, such as:
a. Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayers if on hand at the close of the taxable year
b. Real property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or business.
c. Real property used in trade or business of a character which is subject to the allowance
for depreciation
d. Real property used in trade or business of the taxpayer

2. Capital Assets – any asset other than ordinary assets. Basically, capital assets are:
a. Personal (non- business) assets of individual taxpayers
b. Business assets of any taxpayers which are:
 Financial assets such as cash, receivables, prepaid expenses and investments
 Intangible assets such as patent, copyrights and leasehold rights; franchise rights
 Analysis of Properties Held by Taxpayers
Asset Classification is relative
The classification of assets or properties as ordinary asset or capital asset does
not depend upon the nature of the property but upon the nature of the taxpayer’s
business and its usage by the business.

The revenue regulations classify real and other properties acquired (ROPA) by
banks as ordinary assets even if banks are not actually engaged in the realty
business. This is an apparent recognition of the fact that ROPA are normally
acquired and sold by banks in their normal course of business. However, ROPA
in the form of domestic stocks held by banks are capital assets.

For Asset Classification Rules, please see page 169, Income Taxation 2019 Edition by Rex Banggawan
.
 Types of Gains on Dealings in Properties
1. Ordinary Gain – arises from sale, exchange and other disposition including pacto de
retro sales and other conditional sales of ordinary assets.
2. Capital Gain – arises from sale, exchange and other disposition including pacto de
retro sales and other conditional sales of capital assets.

Taxation of gains on Dealings in Properties

Type of gain Applicable taxation scheme
Ordinary gains Regular income tax
Capital gains General Rule: Regular income tax
Exception Rule: Capital gains tax

Capital Gains Subject to Capital Gains Tax

1. Capital gains on the sale of domestic stocks sold directly to buyer
2. Capital gains on the sale of real properties not used in business
 Scope of Capital Gains Taxation
Gains on dealings in capital assets Tax rates
Gain on the sale, exchange, and other disposition of 15 % capital gains tax
domestic stocks directly to buyer
Sale, exchange and other disposition of real property 6% capital gains tax
in the Philippines
Gains from other capital assets Regular income tax
 Capital Gain on the Sale, Exchange, and Other Disposition of
Domestic Stocks Directly to Buyer
Domestic Stocks
Domestic stocks are evidence of ownership or rights to ownership in a domestic corporation regardless of its
features, such as:
a. Preferred Stocks (participative, cumulative, etc)
b. Common stocks
c. Stock rights
d. Stock options
e. Stock warrants
f. Unit of participation in any association, recreation or amusement club

The capital gains tax covers not only sales of domestic stocks for cash but also exchange of domestic stocks
in kind and other dispositions such as:
1. Foreclosure of property in settlement of debt
2. Pacto de retro sales – sale with buy back agreement
3. Conditional sales – sales which will be perfected upon completion of a certain specified conditions
4. Voluntary buy back of shares by the issuing corporation – redemption of shares which may be re-issued
and not intended for cancellation
 Tax on Sale of Domestic Stocks
Through the PSE
The sale of domestic stocks classified as
capital assets through the PSE is not subject
to capital gains tax. It is subject to a stock
transaction of 60% of 1% of the selling price
effective January 1, 2018.

Modes of Disposing Domestic Stocks

Shares of Stocks may be sold, exchanged
or disposed:
1. Through the Philippine Stock
Exchange or
2. Directly to buyer
Capital Gains Tax on Sale, Exchange and Other Dispositions of
Domestic Stock Directly to Buyer
01 Nature of the CGT 02 What is the tax basis of stocks?

 Universal Tax  If acquired by purchase, the tax basis is determine

It applies to all taxpayers
disposing stocks classified as
capital assets regardless of
classification of the taxpayer.
 Annual Tax
It is imposed on the annual net
gain on the sale of domestic
stocks directly to buyer
by the following methods in descending order of
priority:
Specific identification
Moving average method
First-in, first out
 If acquired by devise, bequest or inheritance -
the fair value at the time of death of the decedent
 If acquired by gift – lower of the fair value at the
time of gift and the basis in the hands of the donor
 If acquired for inadequate consideration – the
amount paid by the transferee for the property
 If acquired under tax-free exchanges – substituted
basis of the stocks
 The Capital Gains Tax Rate
Tax Rates
NIRC (old law) TRAIN Law
Domestic corporation 5% 15%
Foreign corporation 10%

The TRAIN law simplified the rate to a flat 15% rate but retained the old
two-tiered 5%-10% tax structure for foreign corporations.
Two CGT rates now:
1. Foreign Corporation – 5% & 10% CGT
2. Individuals and domestic corporations – 15%
Tax Compliance under the old Law
1. Transactional capital gains tax
2. Annual capital gains tax
Transactional Capital Gains Tax
The capital gains or losses are required to be
reported after each sale, exchange, and other
dispositions through the capital gains tax return, BIR
Form 1707.

Deadline of the transactional capital gains

tax return
The capital gains tax return shall be filed within 30
days after each sale, exchange and other
disposition of stocks. If the tax is qualified for
payment under the installment method, the tax is
due within 30 days after each installment.
Annualized Capital Gains Tax
For Foreign Corporations
The CGT is recomputed on the annual net gains then
previous tax payments are treated as tax credit.
Residual tax due is paid while excess transactional
payment is claimed as tax refund or tax credit.

For Other Taxpayers

The change to a 15% flat rate would mean 15% CGT
when the transaction resulted to a gain but would also
instantly mean 15% CGT refundable when the
transaction resulted to a loss.
Deadline of annual capital gains tax return
The BIR Form 1707-A shall be filed on or before the
15th day of the fourth month following the close of the
taxable year of the taxpayer.
 Installment Payment of the Capital Gains Tax
Concepts

Qualifications: Formula for Capital Gains Tax

When the domestic stock is sold by installments, the Payable
capital gains tax may also be paid in installments if the:
a. Selling price exceed P1,000; and Capital Gains Tax Payable:
b. Initial payment does not exceed 25% of the selling = Collection/Contract Price x Capital Gains Tax
price

Collection of Tax Due Note

Under this method, the tax will be paid based on the Selling price is used to measure the initial payment
pattern of collection of the contract price. The ratio, but the contract price is used in determining
contract price is the total sum of money collectible the capital gains tax in installment.
from the contract.
Special Tax Rules in Capital Gain or Loss Measurement

1. Wash Sales of Stocks

2. Tax-free Exchanges
a. Exchange of Stocks pursuant to a merger or consolidation
b. Transfer of stocks resulting in corporate control
 Wash Sales Rule
Concepts
01 Definition
Wash sale of securities is deemed to occur
when within 30 days before and 30 days after
the losing sale of securities (also referred to as
the 61-day period), the taxpayer acquired or
entered into a contract or option to acquire
the same or substantially identical securities.
02 Rationale
Capital loss on wash sale by non-dealer are not
deductible against capital gains because they
are effectively unrealized. The taxpayers did not
totally let go of the shares. The immediate
reacquisition of the shares makes the loss
theoretical or a feigned loss.
03 Substantially identical securities
Securities for the purpose of the 61-day rule
include stocks and bonds.
Substantially identical means that stocks or
bonds of the same class with the same
features.
04 Significance
The wash sale rule has significance on the
recognition of reportable capital losses on
domestic stocks sold directly to buyer.
Capital Loss = Selling Price – Cost of shares sold (from Jan purchase)
= P38,000 – 40,000 = P 2,000

Case 1: The capital loss of P2,000 on the sale shall not be deductible in the computation of
the annual net capital gains in 2020 because the shares sold were fully replaced within the
61-day period. The loss shall be deferred and added to the tax basis of the replacement
shares. Thus, the adjusted basis of the replacement shares acquired on Mar 1 shall be
P43,000 (Purchase price + deferred loss).

Case 2: The capital loss shall be split. The portion covered by the replacement shall be
disallowed while the portion without replacement cover is a deductible realized loss. Thus,
P1600 is the deferred loss (8,000/10,000 shares x P2,000) and P400 is the deductible loss
(2,000/10,000 shares x P2,000).
 Tax Free Exchanges
Merger or Consolidation

 The gains or losses on share-for-share swaps pursuant to a plan of merger or consolidation

will not be recognized for taxation purposes.
 In a share-swap pursuant to a plan of merger or consolidation, the shareholders of the
acquired corporation will be integrated in the acquiring corporation. The shares of the
acquired corporations will be called in for replacement with the shares of the acquiring
corporation.
 Tax Free Exchanges
Initial Acquisition of Control

 No gain or loss shall also be recognized if property is transferred to a corporation by a

person in exchange for the stocks or units of participation in such a corporation of which
as a result of such exchange, said person, alone or together with others not exceeding
four, gains control of said corporation.
 “Control” means ownership of stocks in a corporation which amount to at least 51% of
the total voting power of all classes of stocks entitled to vote.
 Tax Free Exchanges
Exchange not solely for stocks

 If stocks are exchanged not solely for stocks but with other consideration such as cash and
other properties, the gains but not losses are recognized up to the extent of cash and other
properties received.
 Persons Not Liable to the 15% Capital Gains Tax
Dealers in Securities

01

Investors in shares of stocks in All other persons whether natural

mutual fund company in
connection with gains realized
02
upon redemption of stocks in the
mutual company.
or juridical, who are specifically
03 exempt from national revenue
taxes under existing investment
incentives and other special laws,
such as:
 Foreign governments and
foreign government-owned and
controlled corporations
 Qualified employee trust funds
Sale, Exchange and Other Disposition
of Real Property Classified as Capital
Asset Located in the Philippines
The sale, exchange and other disposition of real
property classified as capital asset located in the
Philippines is subject to 6% of the selling price or the
fair value, whichever is higher.

Fair value of real property is whichever higher of the:

 Zonal value prescribed by the CIR
 Fair market value in the schedule of the Provincial
and City Assessors.

For the land, the capital gains tax is 6% of whichever

is the highest of the selling price, zonal value or the
Provincial or City Assessors’ fair value.
 Nature of the 6% Capital Gains Tax
1. The capital gains tax applies even if the sale transaction resulted to a
loss. Gain is always presumed to exist.
2. The capital gains tax applies even if the sale is involuntary or is forced by
circumstances.
3. The capital gains tax shall be withheld by the against the selling price of
the seller and remit the same to the government.
Scope and Applicability of the 6% Capital Gains Tax

Sale, Exchange and Exceptions to the 6% Capital Gains Tax

1. Alternative taxation rule – The individual seller of
Other Disposition real property capital assets (sold to government)
of Real Property has the option to be taxed at either 6% capital
Classified as Capital gains tax or regular income tax.

Asset Located in the 2. Exemption rules:

- Exemption under the NIRC
Philippines - Exemption under the special laws
Exemption rules
01 Exemption under the NIRC
The sale, exchange and other disposition of a
principal residence for the re-acquisition of a
new principal residence by individual
taxpayers is exempt from the 6% capital
gains tax.
Principal residence means the house and lot
which is the primary domicile of the taxpayer.
If the taxpayer has multiple residences, his
principal residence is deemed that one shown
in his latest tax declaration
Requisites of exemption:
1. The seller must be a citizen or resident alien.
2. The sale involves the principal residence of the
seller-taxpayer.
3. The proceeds of the sale is utilized in acquiring a
new principal residence
4. The BIR is duly notified by the taxpayer of his
intention to avail tax exemption within 30 days of
the sale through a prescribed return (BIR form 1706)
and “Sworn Declaration of Intent.”
5. The reacquisition of the residence must be within
18 months from the date of sale.
6. The capital gain is held in escrow in favor of the
government.
7. The exemption can only be availed of once in every
10 years.
8. The historical cost or adjusted basis of the principal
residence sold shall be carried over to the new
principal residence built or acquired.
 Exemption rules
02 Exemption under the Payment of the 6% CGT by Installment
special laws & Deadline for payment of CGT

1. Sale of land pursuant to the
Comprehensive Agrarian
Reform Program
2. Sale of socialized housing units
by the National Housing
Authority
The capital gains tax may be paid by
installment if, under the payment terms, the
initial payment does not exceed 25% of the
selling price. The initial payment refers to the
collection in the taxable year the sale is made.
Deadline for payment of CGT
CGT shall be filed through BIR form 1706
within 30 days from the date of sale or
exchange. For foreclosure sale, within 30 days
from the date of expiration of the applicable
statutory redemption period. When the CGT
qualified for installment payment, it is due 30
days upon receipt of every installment.
 Questions to Ponder:
1. What are the features of final income taxation?
2. Explain withholding tax at source.
3. Enumerate the passive income subject to final tax and their corresponding tax rates.
4. What are the two types of taxpayers who are subject to final tax rates on all income fr
om within the Philippines? What are the general tax rates applicable to each?
5. Enumerate the requisites of the tax informer’s reward.
6. Discuss the procedures and deadline in remitting the final withholding taxes.
7. What are the ordinary assets and capital assets? Discuss.
8. Enumerate the two types of capital assets subject to capital gains tax.
9. What are the transactions considered as “other disposition” of domestic stocks? What
transactions are not considered as “other disposition”?
10. Discuss the rules on tax basis of stocks acquired by purchase, inheritance, donation, f
or inadequate consideration, and under a tax-free exchange.
 Questions to Ponder:
11. Enumerate the methods in costing stocks in order of priority.
12. Discuss the compliance requirements of the two-tiered capital gains tax.
13. Explain the concept of a wash sale.
14. Enumerate and discuss the tax-free exchanges.
15. What are the criteria of alternative taxation to the 6% capital gains tax?
16. Enumerate the exemption requirements to the 6% capital gains tax.
17. Discuss the nature of the 6% capital gains tax.
18. Compare the taxpayers covered by the 15% capital gains tax and the 6% capital gains tax.
 Required Readings
1. Chapters 5 & 6, pp.135 – 154; pp.167 – 203:

Banggawan, Rex B. 2019. INCOME TAXATION LAWS, PRINCIPLES, AND

APPLICATIONS. Real Excellence Publishing., Pasay Default Barangay,
Pasay City, Philippines.

2. https://www.bir.gov.ph/index.php/tax-information/capital-gains-tax.html
 Learning Activities
Chapters 5 & 6, pp.155 – 166; pp.204 – 220:

Banggawan, Rex B. 2019. INCOME TAXATION LAWS, PRINCIPLES, AND

APPLICATIONS. Real Excellence Publishing., Pasay Default Barangay, Pasay
City, Philippines.
 References
Banggawan, Rex B. 2019. INCOME TAXATION LAWS, PRINCIPLES AND APPLICATIONS. Real Exc
ellence Publishing., Pasay Default Barangay, Pasay City, Philippines.

BIR Form 0619-F (Monthly Remittance Return of Final Income Taxes Withheld. Retrieved from https://
www.bir.gov.ph/images/bir_files/taxpayers_service_programs_and_monitoring_1/0619-F%20Jan%202
018%20rev%20final.pdf

BIR Form 1601-FQ (Quarterly Remittance Return of Final Income Taxes Withheld. Retrieved from http
s://www.bir.gov.ph/images/bir_files/taxpayers_service_programs_and_monitoring_1/1601-FQ%20final
%20Jan%202018%20rev%20DPA.pdf
 Appendix: Course Materials Evaluation
Adopted: BEST PRACTICES AND SAMPLE QUESTIONS FOR COURSE EVALUATION SURVEYS. Retrieved from
https://assessment.provost.wisc.edu/best-practices-and-sample-questions-for-courseevaluation-surveys//.