Capital Asset (Section 39)

 Property held by taxpayer whether or not connected with his trade or business but does not include:
o ORDINARY ASSET
 Stock in trade (Inventoriable)
 Property primarily HFS (Real property dealer)
 Property used in business (depreciable asset)
 Real property used in trade or business

Accounts Receivable and Prepaid Insurance are capital asset

The ff. apply to individuals

1. Holding period
2. Limitation on Capital Losses
3. Net Capital Loss Carry over
a. Amount not to exceed NI for such Year
i. 2020 – Net Cap Loss 500K ; Net income 300K
ii. 2021 – NOLCO allowed; 300k (100%)

CAPITAL ASSET

Asset in TAX

1. Ordinary
a. Subject to RIT
Generally subject to VAT, DST, and CWT
2. Capital
a. Subject to CGT
i. Unlisted domestic shares sold directly to buyer 15%
ii. Real property located in PH 6%
NOT subject to VAT, DST, and CWT
b. Subject to RIT
i. All other than the 2 above
Generally subject to VAT, DST, and CWT

To be considered as a loss from the sale or exchange, on the last days of such taxable year, of capital assets

Holding period:

 Bought the securities April 5, 2020 (P1M)

 Became worthless on April 1, 2021 (P0)

In case of individuals:

 ST holding period (12 months or less) – P1M Capital Loss

 Dec 31, 2021 (LT holding period) P500K capital Loss

WAGERING LOSSES

 Wagering gains P1M

 Wagering Losses P1.5M
Deductible only 1M

Gains 1M
Loss 1M
Taxable 0

Producing well re-continued, resumed

2020 2025

GI xx 10M
Allow. Deduction P10M xx
NOL P10M 10M

BAD DEBTS

2020 2025

C1 C2 C1 C2
GI 1M 1M 100K 0
Allow. Deduction 500K 2M
TI b DB P500K (1M)

BD 100K 100K - check if deductible (Sec 36B)

TI (NOL) 400k (1.1M)
Reduced Inc. Tax No effect – No tax benefit, no impact in the year of recovery

Taxable income 150,000 160,000

Additional information
Included CC 10,000 (nonpriority)
Actual CC 5,000 (Priority) 175,000 (TI)
Individual 10% corporation 5%
Limit is 16,000 Limit is 8,000

Donation to Typhoon Survivor – padainin sa accredited organization para ma-claim as deduction