INCOME TAXATION

Name:__________________________ Date:_________________________
Section:________________________ CAPITAL GAINS TAXATION

1. Newt sold the following shares of stock of domestic corporations which he bought for investment
purposes:
Listed and traded Not listed and trade
Selling price 250,000 143,680
Selling expense 12,000 3,680
Cost 118,000 80,000

Determined the capital tax assuming the sale was made in 2018
Assume Bryan is a dealer in securities, the capital gains tax in 2018 is
Assume the shares sold are shares issued by foreign corporations, the capital gain tax in 2018:

Assuming the taxpayer is a foreign corporation

Determined the capital tax assuming the sale was made in 2018
Assume Bryan is a dealer in securities, the capital gains tax in 2018 is
Assume the shares sold are shares issued by foreign corporations, the capital gain tax in 2018:

2. Dobby, a resident citizen, disposed the following shares of stock of a domestic corporation whose
shares are not listed and traded in the local stock exchange:
Date of Sale Cost Selling Price
Jan. 15, 2017 P80,000 135,000
Feb. 14, 2017 175,000 150,000
March 30, 2017 256,000 360,000

The capital gains tax on the Jan. 15, 2017 sale is –

The capital gains tax on the Feb. 14, 2017 sale is –
The capital gains tax on the March 30, 2017 is –
The capital tax payable (refundable) when the consolidated return is filled on or before April 15, 2017

If the taxpayer is a foreign corporation

The capital gains tax on the Jan. 15, 2017 sale is –
The capital gains tax on the Feb. 14, 2017 sale is –
The capital gains tax on the March 30, 2017 is –
The capital tax payable (refundable) when the consolidated return is filled on or before April 15, 2017

3. Dumbledore sold his principal residence at a gain of P1,000,000. The same property was acquired in
2002 for P2,000,000 and had a zonal and assessed value of P2,500,000 and P2,200,000, respectively,
at the date of sale. Immediately after the sale, Dumbledore acquired a smaller residence for his family
for P1,800,000. Compute the net capital gains tax due from Dumbledore.

4. Magic Realty Corporation, a real estate dealer, sold a 500 sq. meter house and lot for P4,500,000. The
house and lot was sold at 20% discount from its appraised value and 10% discount from its zonal value
which is also the same with its assessed value. Magic corporation used the proceeds to acquire a
smaller house and lot for P3,000,000 after 2 years from the date of acquisition. Compute the capital
gains tax due from the transaction.

5. Voldemort corporation, a resident foreign corporation, paid P25,000 in capital gains tax when they sold
their investments representing stocks of a domestic corporation directly to buyer. The stocks cost
voldemort P800,000. Compute the selling price of voldemort’s stocks

6. Digory is a realty dealer. He buys and sells for his account and also sells developed properties of
Baguio Realty Corporation (BRC), a non-listed domestic corporation, on a commission basis. In 2009,
he sold various house and lots at a gain of P5,000,000 for BRC. He was paid commissions in kind
consisting of 150,000 BRC stocks with fair value of P450,000 at the date of receipt. In 2010, Digory
sold half of the shares for P9 per share to a corporation who is very eager to acquire ownership of
BRC. Compute the capital gains tax on the transaction.

7. The following relates to the disposition and reacquisition of Snape’s principal residence:

Construction cost of new residence P 4,000,000

Excess cash proceeds from the sale of the old residence 500,000
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 The old residence was subject to P 500,000 mortgage which was assumed by the buyer. The old residence
should have been sold at its P6,000,000 fair market value except that Snape was too eager to close the
sale and was so excited to see his new home which he himself designed.

Compute the capital gains tax that should be deposited in escrow at the date of sale.

Compute the capital gains tax to be released to Snape upon construction of his new residence

8. Which of the following sale transactions will be subject to capital gains tax?
a. Sales of shares of stock by a dealer in securities
b. Sales of shares of stock during an Initial Public Offering
c. Sales of shares of stock not through the local stock exchange by a person who is not a dealer in
securities.
d. Sales of shares of stock through the local stock exchange by a person who is not a dealer in securities.

9. Statement 1: Tax CGT on sale of real properties shall be paid within 30 days from sale or disposition.
Statement 2: The CGT on the unutilized portion of the proceeds in case of sale of a real property
classified as a principal residence shall be paid within 30 days after the expiration of the 18 month
period.
A B C D
Statement 1 True False True False
Statement 2 True False False True

10. Which of the following transaction is subject to 6% capital gains tax:

a. Sale of condominium units by a real estate dealer
b. Sale of real property utilized for office use
c. Sale of apartment houses
d. Sale of vacant lot by an employee

11. Statement 1: The determination of 6% capital gains tax on sale of real property is based on net capital
gains realized by the seller of real property.
Statement 2: Except for certain passive income, a nonresident alien not engaged in trade or business
shall be taxed at 25% of his gross income derived from sources within the Philippines
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

12. Mike, a resident citizen taxpayer owns a property converted into apartment units with a monthly rental
of P10,000 per unit. He subsequently sold the property to Leomar, a resident alien taxpayer. The sale
shall be subject to:
a. 6% Capital gains tax
b. Regular income tax
c. 6% capital gains tax or basic income tax at the option of Mike
d. 6% capital gain tax or basic income tax at the option of Leomar.

13. Statement 1: Proceeds of sale of real property classified as capital asset may be exempt from the 6%
capital gains tax.
Statement 2: Gain from sale of real property classified as capital asset to the Government may be
taxed under Section 24 (A) at the option of the individual taxpayer.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

14. Vincent sold a residential house and lot held for P10,000,000 to his friend. Its FMV when he inherited it
from his father was P12,000,000 although its present FMV is P15,000,000.
The tax on the above transaction is:
a. P720,000 capital gains tax
b. P900,000 capital gains tax
c. 30% donor’s tax
d. Value added tax

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 15. Assuming the house and lot was Vincent’s principal resident and he used ½ of the proceeds to buy a
new principal residence within eighteen months after the above sale. Assume further that Vincent
properly informed the BIR about the sale. It shall be:
a. Exempt from capital gains tax
b. Subject to P300,000 capital gains tax
c. Subject to P450,000 capital gains tax
d. Subject to P600,000 capital gains tax

16. Based on the above problem, but assuming the residential house is located abroad, the capital gains
tax is:
a. P0 c. P450,000
b. P300,000 d. P 480,000

17. In 2017, East Star Inc. sold shares of stock for P250,000. The shares, acquired in 2015 at a cost of
P100,000, were held as investment, and were sold directly to a buyer. How much was the capital gains
tax due?

18. Using the same data in the preceding number, how much is the capital gains tax assuming the shares
were sold in 2018?

19. Assume the shares sold were not held for investment purposes and the seller is a dealer in securities,
how much is the capital gains tax?
20. Assume the shares sold were from a foreign corporation, what type of income tax will apply on the
transaction?
a. Regular income tax
b. Capital gains tax
c. Either a and b at the option of the seller
d. Either a and b at the option of the buyer

21. In 2017, East Star Inc. sold shares of stock of a domestic corporation for P250,000. The shares,
acquired in 2015 at a cost of P100,000, were held as investment , and were sold through the local stock
exchange. How much was the applicable tax due?

22. Assume the sale in the immediately preceding number was made in 2018, the applicable tax due is?

23. Assume the shares sold were not held for investment purposes and the seller is a dealer in securities,
how much is the capital gains tax?

24. Which of the following income will be taxed in the same manner regardless of the classification of the
taxpayer?
a. Capital gain on sale of land and/or building
b. Capital gain on sale of shares of stock of a domestic corporation
c. Ordinary gain on sale of land and/or building
d. Ordinary gain on sale of shares of stock of a domestic corporation

25. A dealer in securities sold unlisted shares of stocks of a domestic corporation in 2018 and derived a
gain of P500,000 therefor. The gain is
a. Taxable at 30% regular corporate income tax based on net taxable income
b. Taxable at 15% capital gains tax based on net capital gain
c. Taxable at 6/10 of 1% stock transaction tax based on the gross selling price or fair market value,
whichever is higher
d. Exempt from income tax

26. Godric Gryffindor had the following transactions in JKL Corporation’s common stock:
Oct. 10, 2018 Purchased 10,000 shares @P100 P1,000,000
Oct. 28, 2018 Purchased 5,000 shares @P98 490,000
Nov. 24, 2018 Sold the 10,000 shares purchased on 10/11/13 920,000
Dec. 10, 2018 Purchased 3,000 shares @P90 270,000

a. Determine the loss sustained by Godric and indicate whether it is deductible or not.
b. If the shares acquired on October 28, 2018 are sold today at Php 100 per share, determine D’s gain
or loss.

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