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Tax on Gains and Dealings in Properties

J. Tamayao
 TAX SCHEMES OF DEALINGS IN PROPERTIES
TP Engaged in Business?
TET
YES. NO.
PIP
6T Classify Assets. personalAsset

Ordinary Assets Capital Assets Capital Assets

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RIT RIT CGT
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Ordinary Gain = Taxable in Full Added only if: Domestic Stocks directly to Buyer = 15%

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Ordinary Loss = Deductible In Full NET CAPITAL GAIN OR LOSS

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8 Real Property classified as CA = 6%

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 DEALINGS IN PROPERTIES
Definition: 00
It refers to the disposal through sale or exchange, or other disposition
including pacto de retro sale & other conditional sales of (a) ordinary
assets, or (b) capital assets.

Ordinary Asset OA Capital Asset

Ordinary Assets includes: (Sec. 39(A), NIRC)
v stock in trade of the taxpayer or other property of a kind
which would properly be included in the inventory of the
taxpayer if on hand at the close of the taxable year; or
v property held by the taxpayer primarily for sale to
t
customers in the ordinary course of his trade or business; E
Classified as OA:
Held for Sale (Inventory) 0
IF NOT Classified as OA:

CAPITAL ASSET
or Used in the Business
v property used in the trade or business of a character which

yes
is subject to the allowance for depreciation provided in
subsection (F) of Sec. 34 of the Code; or
v real property used in trade or business of the taxpayer.
 SPECIAL RULES IN ASSET CLASSIFICATION
Ordinary to Capital – If the business is not engaged in
When Changed? real estate business, the asset is converted to capital
ord capita asset upon showing proof that the same have not been
used in business for more than two years prior to the
Red.EE8 aP
consummation of the taxable transaction involving said
Real Estate Company properties. (Properties as to use)

Ord Real Estate to Non-Real Estate Business – the real

Still Ordinary Asset:
properties shall STILL be considered ordinary assets
Real Estate unable to operate – the real properties
CONTINUE to remain as ordinary assets

Real and other properties, including stocks and

Ordinary Asset securities acquired by banks for clients loan settlements
or foreclosed
Bank & Trust Co.
Capital Asset Investments in stocks and securities owned by banks
 TAX BASIS OF GAIN OR LOSS ON DEALING
For Real Property
All Other Properties
subject to CGT
@ Gross @ Net

Gain is PRESUMED Actual Gain or Loss

SadProp
lust 5M egg Applies to:
1. Sale of Domestic Stock Directly to Buyer

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2. Dealings on Ordinary Assets
1 3. Dealings on Capital Assets

711 a GIL
feared
Gross
Net
 CGT ON REAL PROPERTY
On the gains presumed to have been realized by the seller from the sale,
What? exchange, or other disposition of Real Property classified as capital assets
located in the Philippines, including pacto de retro sales and other forms of
conditional sale

XPNs: Requisites: AXPR

v The capital asset sold was a principal residence;
Land Reform CARP v The taxpayer is a citizen of the Philippines or resident alien; NRA
v The proceeds of the sale was invested in acquiring a new principal
Socialized Housing to NHA residence; utilization
v Notice to make such utilization was given to the BIR within 30 days from the
Principal Residence date of sale; 1706 sworndellarator
v Utilization of the proceeds of the sale was made within eighteen (18)
months from the date of sale;
v A cash deposit is made with an accredited bank for an amount equal to the
capital gain tax, and answerable for the capital gain tax should the
sP tnff.mk conditions for the exemption be not satisfied; escrow deposit
lost 5M v The exemption shall be availed of once only every ten years.

1
18Mons 12
 Sale of Principal Residence (PR)
Tax: Generally, exempt if all requisites are satisfied. 18 f
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TAXABLE – if partial utilization.
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Tax Basis of New PR: 61x SPFMV 6 7M 0K lost Er 0 10M

Full Utilization
If the Proceeds of the Sale is FULLY REINVESTED:
Tax Basis = Old Residence Basis ffffhnxw f
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If the Proceeds of the Sale is REINVESTED MORE THAN the amount of proceeds: Han
More than Full Utilization
Tax Basis = Old Residence Basis + Excess Investment
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Partial Utilization
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If the Proceeds of the Sale is NOT FULLY REINVESTED:
Tax Basis = Portion Reinvested x Old Residence Basis
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 SP taxable SP

CGT ON REAL PROPERTY

Tax Base x Tax Rate = Tax Due

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Fair Market Value or Selling 6% NOTE:
Price, whichever is higher. v No tax due for full utilization

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of sale of PR.
FMV: Higher Between: v Tax Due rule for installment
1. Zonal Value sales.
2. Assessed Value
Rule on Installment Sale:
lot 24
8 M
House a If Initial Payments <= 25%, can pay in installment.
Downpayment + Collections
in on SP when
nextins
pay
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Initial Payments
Selling Price X Tax Due
Contract Price
Less: Mortgage Assumed
Plus: Constructive Receipt SP7Mx6 420K
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CGT COMPLIANCE ON SALE OF REAL PROPERTY

Form Deadline
BIR Form No. 1706 - Filed within thirty (30) days following
Capital Gains Tax Return for Onerous each sale, exchange or disposition of
Transfer of Real Property Classified real property
as Capital Asset (both Taxable and
Exempt) IS
CERTIFICATE AUTHORIZING REGISTRATION (Sec. 58(E), NIRC)
CAR Certifies that such sale has been reported to the BIR and the capital gains
tax or creditable withholding tax, if any, has been paid.

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DST ON SALE OF REAL PROPERTY & TAX COMPLIANCE

Form Deadline
BIR Form No. 2000-OT The return shall be filed and the tax
Documentary Stamp Tax paid within (5) days after the close of
Declaration/Return (One Time the month when the taxable document
Transactions) was made, signed, issued, accepted or
transferred.

Tax Due: 15 / 1,000 15 wasomadeon

Jan10
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 CGT ON STOCK DIRECTLY TO BUYER
On the gains have been realized by the seller from the sale, exchange, or other
What? disposition of stock classified as capital assets located in the Philippines,
including pacto de retro sales and other forms of conditional sale

XPNs:
Exchange for Services
Iag
DE Gratuitous Transfer Not Subject to Income Tax

Issuance of Stock ofshoe financing

sat.fi Receipt of Liquidating

Subject to RIT (Capital Gain / Loss)
Dividend
Redemption of Stock omcellat F.pt
I outfor ionellum
Domestic 6T
Foreign Rit
 CGT ON STOCK DIRECTLY TO BUYER
Cbt presumed
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Tax Base x Tax Rate = Tax Due
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Selling Price NOTE:peach
annotated
15%
Less: v Transactional / Annual
Cost ymggg v Tax Due rule for installment
Selling Expenses freak sales.
DST
Net Gain or Loss rr Rule on Installment Sale:
RP
• If Selling Price > 1,000 ofsted
Downpayment + Collections • If Initial Payments <= 25%, can pay in installment.
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SI.FMKeane Initial Payments
IDeise.int X Tax Due
tffi t Selling Price
Less: Mortgage Assumed
Contract Price
Plus: Constructive Receipt
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 WASH SALES RULE cotor
Deemed to occur when within 30 days before and 30 days after the losing sale of securities, the
taxpayer entered into a contract or option to acquire the same or substantially identical shares.
0
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General Rule: The Loss shall not be deductible in full if there is a wash sale.

Full Replacement Partial Replacement

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No Replacement
The amount of loss is added to Deductible loss – only Deductible loss.
the cost of replacement shares. proportion of unreplaced
120 151 8
2
1204 shares.
Added to the cost – proportion
Tapital losses

13K544g of shares replaced. Rob

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 CGT COMPLIANCE ON SALE OF STOCK DIRECTLY TO BUYER
Form Deadline
BIR Form No. 1707 transactional - Filed within thirty (30) days after each
Capital Gains Tax Return for Onerous cash sale, barter, exchange or other
Transfer of Shares of Stocks Not disposition of shares of stock not
Traded Through the Local Stock traded through the local stock
Exchange exchange.
BIR Form No. 1707A Anna - On or before the 15th day of the
Annual Capital Gains Tax Return for fourth month following the close of the
Onerous Transfer of Shares of Stocks taxable year
Not Traded Through the Local Stock
Exchange
Dec31 yAp
1504 13 5 22,5W Jan goin 150k
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DST ON SALE OF STOCK DTB & TAX COMPLIANCE
Form Deadline
BIR Form No. 2000-OT The return shall be filed and the tax
Documentary Stamp Tax paid within (5) days after the close of
Declaration/Return (One Time the month when the taxable document
Transactions) was made, signed, issued, accepted or
transferred.

1.5/200 of the par value of the stocks sold

Tax Due:

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Basis Presmedbain AivalGan

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1706 1707
DST 2000.01 2814 10 tis is

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 174231

DEALINGS SUBJECT TO RIT

Ordinary Assets Capital Assets
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Selling Price Net 61L
Less: Holding Period Rule
Cost ST –100% A Always 100%
Net Gain or Loss LT – 50%
Capital Loss Limitation Rule
Ordinary Gain = Taxable in Full
Applies to both Individual and Corporation. Capital loss
Ordinary Loss = Deductible in Full can be deducted up to the extent of Capital Gain.
NCLCO Rule

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a Allowed. NOT Allowed.

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Carried over for 1 year from NCL.
Limit 1: Amount of NI previous year
Deductible Limit 2: Capital Gain during the year

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NCLCO