Example: Individual

Mr. Makati sold various properties as follows in 2016:

Items Sold Date Acquired Date Sold Gains(Loss)

Car 14-Aug-14 14-Feb-16 100,000.00
Office Supplies 01-Jun-15 05-Dec-16 20,000.00
Laptop April 5, 2015 April 5, 2016 80,000.00
Home Appliances 21-Jul-15 24-Aug-16 - 160,000.00
Books 28-Dec-15 26-Nov-16 - 30,000.00
Vacant Lot 14-Feb-15 03-Dec-16 250,000.00

The net capital gain or loss shall be computed as follows:

Items Sold Holding Period Gains(Loss) %

Car Long-Term 100,000.00 50%
Laptop Short-Term 80,000.00 100%
Home Appliances Long-Term - 160,000.00 50%
Books Short-Term - 30,000.00 100%
Net Capital Gains

Example: Corporation

Bataraza Corporation, a domestic shipbuilding company, assigned its receivable to the bank without recourse at a loss of P20
it disposed an old building at a gain of P800,000 and its investment in foreign securities at a gain of P350,000. All assets were

The net capital gain or loss shall be computed as follows:

Sale of foreign securities (350,000x100%) 350,000

Assignment of receivables [(200,000)x100%] -200,000
Net Capital Gain 150,000
 Gain(Loss)
50,000.00
80,000.00
- 80,000.00
- 30,000.00
20,000.00

recourse at a loss of P200,000. During the year,

P350,000. All assets were held for more than 1 year.
Example:

Mr. Tayabas, a self-employed resident citizen with personal exemption of P50,000, reported P800,000 gross receipts and P30
business expenses of P240,000. He also had the following dealings in properties during the year:

Dealings in properties Holding period Gains(Loss)

Ordinary Assets
Equipment 8 months 20,000.00
Old Machines 18 months - 25,000.00

Capital Assets
Foreign Bonds 4 months 100,000.00
Domestic Bonds 15 months - 150,000.00
Domestic Stocks 8 months 80,000.00
Foreign Stocks 18 months 40,000.00

The net capital gains shall be computed as follows:

Foreign Bonds - 100,000x100% 100,000.00
Domestic Bonds - (150,000)x50% - 75,000.00
Foreign Stocks - 400,000x50% 20,000.00
Net Capital Gain 45,000.00

Assuming Tayabas is a Corporation

The net capital gains shall be computed as follows:

Foreign Bonds - 100,000x100% 100,000.00

Domestic Bonds - (150,000)x50% - 150,000.00
Foreign Stocks - 400,000x50% 40,000.00
Net Capital Loss - 10,000.00
ted P800,000 gross receipts and P300,000 cost of services before

Presentation in the Income Tax Return

The reportable gains and losses shall be presented in the income tax return as follows:

Net Sales/Revenues/Receipts/Fees 800,000.00

Add: Other taxable income from operations -
Total Sales/Revenues/Receipts/Fees 800,000.00
Less: Cost of Sales or Services 300,000.00
Gross Income From Operations 500,000.00
Add: Non-operating taxable income
Ordinary Gain on equipment 20,000.00
Net Capital Gain 45,000.00 65,000.00
Total Gross Income 565,000.00
Less: Allowable deductions
Business Expenses 240,000.00
Ordinary loss on old machines 25,000.00 265,000.00
Net Income 300,000.00

Presentation in the Income Tax Return

The reportable gains and losses shall be presented in the income tax return as follows:

Net Sales/Revenues/Receipts/Fees 800,000.00

Add: Other taxable income from operations -
Total Sales/Revenues/Receipts/Fees 800,000.00
Less: Cost of Sales or Services 300,000.00
Gross Income From Operations 500,000.00
Add: Non-operating taxable income
Ordinary Gain on equipment 20,000.00 20,000.00
Total Gross Income 520,000.00
Less: Allowable deductions
Business Expenses 240,000.00
Ordinary loss on old machines 25,000.00 265,000.00
Net Income 255,000.00
n as follows:

n as follows:
Example:

John Hay, a Filipino Citizen, reported the following gains and losses from dealings in properties:

Ordinary Assets:
Delivery Truck in the Philippines 120,000.00
Obsolete Inventories in the Philippines - 40,000.00
Commercial Building Abroad 300,000.00
Used Equipment Abroad - 80,000.00

Capital Assets:
Domestic Bonds, held for 14 months 100,000.00
Non-resident foreign corporation stocks held for 8 months - 30,000.00

The situs of ordinary gain or loss shall be:

Ordinary gains Within Without

Delivery Truck 120,000.00
Commercial Building 300,000.00
Total 120,000.00 300,000.00

Ordinary losses Within Without

Obsolete Inventories - 40,000.00
Used Equipment - 80,000.00
Total - 40,000.00 - 80,000.00

Considering situs rules, the net capital gain or loss from capital assets, other than domestic stocks and real property, are as fo

Net capital gains or loss Within Without

Domestic Bonds - 50% 50,000.00
Foreign Stocks - 100% - 30,000.00
Net Capital Gains or Loss 50,000.00 - 30,000.00

The reportable results of dealings in properties are as follows:

If John Hay is a; Ordinary Gain Ordinary Loss Net Capital Gains/(Loss)

Resident Citizen 420,000.00 - 120,000.00 20,000.00
Non-resident citizen 120,000.00 - 40,000.00 50,000.00
 World
120,000.00
300,000.00
420,000.00

World
- 40,000.00
- 80,000.00
- 120,000.00

cks and real property, are as follows:

World
50,000.00
- 30,000.00
20,000.00

et Capital Gains/(Loss)
Example 1:

Mr. Quintey reported the following in 2015 and 2016:

2015 2016
Net Income before dealing in properties 70,000.00 300,000.00
Dealings in Ordinary Assets:
Ordinary gains 40,000.00 30,000.00
Ordinary losses - 80,000.00 - 50,000.00
Dealings in Capital Assets:
Capital Gains 20,000.00 80,000.00
Capital Losses - 60,000.00 - 30,000.00
Net Capital Gains(Losses) - 40,000.00 50,000.00

The net income before dealings in capital assets should be determined first. Thus,
2015 2016
Net Income before dealing in properties 70,000.00 300,000.00
Ordinary gains 40,000.00 30,000.00
Ordinary losses - 80,000.00 - 50,000.00
Net Income before dealings in capital assets 30,000.00 280,000.00

The net capital gain in 2016 shall be computed as follows

2015 2016
Net Capital Gains(Loss) - 40,000.00 50,000.00
Carry-over: Lowest of P30K, P40K and P50K 30,000.00 - 30,000.00
20,000.00

The net income for each year shall be computed as follows:

2015 2016
Net Income before dealings in capital assets 30,000.00 280,000.00
Add: net capital gain - 20,000.00
Net Income 30,000.00 300,000.00
Example:

Veruela Corporation disposed its old factory for P5,000,000. The lot where the factory building stands were acquired ten year
at P1,500,000. Veruela Corporation paid P3,000,000 for the construction of the factory building. The factory building has a
carrying value net of accumulated depreciation of P1,200,000 at the date of sale.

The tax basis of the factory shall be:

Lot 1,500,000.00
Building 1,200,000.00
Tax Basis 2,700,000.00

Hence, the gain or loss shall be:

Selling Price 5,000,000.00
Less: Tax basis of factory 2,700,000.00
Gain on sale 2,300,000.00
 lding stands were acquired ten years ago
uilding. The factory building has a