Chapter 12:

Dealings in
Properties
Presented By: Liezel Vonne M. Caballero
Dealings in Properties
Involve in sale, exchanges, and other disposition
of properties such as ordinary assets or capital
assets.
Subject to regular income tax
Subject to final tax
Subject to CGT

Dealings in Ordinary Assets &

Dealings in Capital Assets
Dealings in ordinary assets may result in an
ordinary gain or ordinary loss.
While Dealings in capital assets may likewise
result in a capital gain or capital loss.
Tax Treatment of Ordinary
Gains and Losses
Ordinary Gains :
ORDINARY GAINS - Separate items in gross
income subject to RIT
Ordinary gain is taxable in full.

Ordinary Losses:
items of deductions from gross income in the
determination of net income from business or
profession.
Ordinary losses are deductible in full.
Tax Treatment of Ordinary
Gains and Losses
Capital Gains & Losses:
Under NIRC, capital losses are deductible
only up to extent of capital gains from
dealings in capital assets other than
domestic stocks in real properties.
Capital gains and Capital losses are offset.
Net Capital Gain = subject to regular
income tax
Net Capital Loss = NOT an item of
deduction against gross income.
 DETERMINATION OF NET CAPITAL GAIN/NET CAPITAL
LOSSES

Net Capital Loss Carry

Holding Period rule
Over

Individual: Corporate: Individual: Corporate:

Not more than 1 yr, Regardless of ALLOWED to carry- Are NOT

(Short term) - 100% the length of the over net capital loss allowed under
of the capital holding period, as a DEDUCTION the NIRC to
gain/loss is 100% of the against net capital carry over net
recognized. capital gain. capital loss.
More than 1 yr. gain/capital loss
(Long term) - 50% is recognized.
of the capital Holding period Limit 1: amount of net Limit 2: available
gain/loss is rule does not income in the year the net net capital gain in
recognized. apply to capital loss was sustained the following year.
corporations
 SELLING PRICE

The sum of money Fair Value of non-cash

received properties received
TAX BASIS:
The cost, carrying amount, or depreciated cost of an asset.
Generally, it is the purchase price or the fair value of consideration paid in
acquiring the property disposed of.
TAXABLE EXCHANGES:
1.Share-for-share swap transactions
Or property-for-share transaction that are not in
pursuant to a plan of merger or consolidation are
taxable. Losses are recognized subject to the
applicable tax rules.

2. Transfer of properties to a corporation

alone or with four others
Which did not result in the acquisition of corporate
control.
3. Transfer of properties to a controlled
corporation after the initial acquisition or
controls
Taxable. Losses are nondeductible since the
transferee is a related party to the transfer.
 WASH SALES

Foreign shares Debt securities, foreign or domestic

Gains from a wash sales transaction are TAXABLE but the LOSSES are not deductible.
TRANSACTIONS CONSIDERED EXCHANGES:
1. Retirement of bonds, debentures, notes, or certificates and
other evidence of indebtedness.
2. Short sale of properties
3. Failure to exercise a privilege or option to buy or sell property
that is a capital asset
4. Security becoming worthless
5. Receipt of liquidating dividends
6. The amount received in liquidation of a partnership is also
deemed in exchange of the partner’s interest on the partnership
7. Redemption of shares for cancellation or retirement
8. Voluntary buy-back of shares