TAXATION 1. Capital Assets ResA The Review School of Accountancy ‘Tel. No, 735-9807 & 734-3989 TAMAYO/GARCIA Tax nd Loss ‘a. Meaning of capital assets b. Not included in capi assets ‘connected with his trade or business. ‘The term does not include a b. ce 4, e | The term “capital assets” means property held by the taxpayer whether or not lowing (hee ordinary assets): ‘Stock in trade; Property of a kind which would be included in inventory of the taxpayer if on hand at the close of the taxable year; Property held by the taxpayer primarily for sale to customers in the ordinary course of trade or business; Personal property used in the trade or business which is subject to allowance for deprecation; i Real property used in business. Exercise: Classify the following into capital asset or ordinary asset Classification ‘Accounts receivable _ 2. Securities held as inv 3, Interest of a partn rin a partnership 4, Apartment house 6. Office equipment Tnventories of raw materials, work in process rocess and finished 7. Land in business 8. Land for sale by a real estate dealer i ‘9, Residential house and lot a. Net capital gain 10. Car for personal use ‘2 Terms Associated with Capitat Assets ‘The excess of capital gain over capital loss. . Net capital loss The excess of capital loss over capital gain. . Holding period date of acquistion to the date of sale. _ 3. Summary of Important Points The length of time the asset was held by the taxpayer. Tt covers the period from the | Question 1 - How much is the taxable net income in 2013 and 20147 in 2013 and 2014? ‘Taxpayers other than corporations ‘Corporations ‘a. Short term capital gain or loss (capital asset has been held for notmore a — than 12 months) _ ae ’. Long term capital gain or loss(capital asset has been held for more than Rs poor 12months) aire - . Limitation on deduction | Capital losses shail be allowed only tothe __|. Capital losses shall be allowed only to of capital losses extent of capital gains. the extent of capital gains. |&. Net capital loss carry over | Net capital loss is carried over to the Capital loss carry over is not allowed. sucoeeding year as a short term loss (100%). ‘Amount to be carried over is the lower between the net capital loss and net income | ____| im the year the loss was sustained. pe . Exercise {AST Corporation has the following data for the years 2013 and 2014: 2013: Gross income 250,000 Business expenses 180,000 Capital loss (capital asset was acquired on January 15, 2013 and was sold on March 15, 2013) 50,000 Capital gain (capital asset was acquired on January 15, 2041 and was sold on March 31, 2013) 30,000 2014: Gross income 500,000 Business expenses 400,000 Capital gain (capital asset held for 12 months) 60,000 Capital loss (capital asset held for more than 12 months) 20,000 2 - Assuming the taxpayer is an individual taxpayer, single resident citizen, how much is the taxable net income