https://www.therealestategroupphilippines.com/2017/0 d) Real property used in trade or business.

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%20Sec.&text=Real%20property%20used%20in%2 building, warehouse etc. lahat ng property.)
0trade%20or%20business%20of%20the%20taxpayer.
When shares of stocks be treated as an ordinary assets or
Capital gains tax as capital assets
When you sell a capital asset for more than you paid for - an equity investment is a capital not ordinary
it, the result is a capital gain. Capital assets include asset of the investor the sale or exchange of
stocks, bonds, precious metals, jewelry, and real estate. which results in either a capital gain or capital
The tax you'll pay on a capital gain depends on how long loss. Shares of stock like the other securities
you held the asset before selling it. Capital gains are defined in sec 22 of the NIRC, would be ordinary
classified as either long-term or short-term and are assets only to a dealer in securities or a person
taxed accordingly. engage in the purchase and sale of, or an active
trader (for his own account) in securities, in the
hands, however, of another who holds the shares
RULES ON CAPITAL GAINS AND LOSSES page 153 of stock by way of an investment, the shares to
- gains and loss from dealings in property shall include all him would be capital assets. When the shares
gains or losses derived from the disposition of property held by such investor, become worthless, the loss
(real, personal, or mixed) for money in case of sale, or is deemed to be a loss from the sale or exchange
for property in case of exchange or form a combination of capital assets.
of both safe and exchange.
- sabi lang dito, in general, ung equity investment, or ung
- The rules on capital gains and losses shall apply only if mga stocks na tinatawag, normally hindi sila ordinary
the transaction on capital assets is either a sale or assets – capital asset sila, pero nagiging ordinary assets
exchange. There is a sale or exchange of property when parin ito pag ung dealer ng stocks is undergoing ng
there is an effective and actual transfer of ownership of trade, or pag buy and sell sa mga ito. Otherwise, pag
the property to another as would divest the transferor hindi ito ung condition, hindi siya ordinary asset.
of the benefits accruing from the ownership of the
property, for a valuable consideration. Treatment of ordinary gains and losses:
I. Ordinary gains are included in the gross income
1. Ordinary assets
II. Ordinary losses are deductible from gross income.
a) Stock in trade of the taxpayer or other
properties of a kind which would properly be 2. Capital assets – all other properties held by the taxpayer
included in the inventory of the taxpayer if on whether or not connected with his trade or business not
hand at close of the taxable year (supplies, classified as ordinary asset.
Example:
merchandise inventory, lahat ng ginagamit for
sale basta related sa inventory. Ung stock dito
ung number or quality ng product na available A. Accounts receivable
ibenta, hindi ung sa stock exchange) B. Investment of stocks
b) Property held by the taxpayer primarily for sale C. Goodwill
to customers in the ordinary course of business D. Real property not used in trade or business
(subdivision for real estate, parang sa a rin ito E. Personal property not used in trade or business
kaso ito more on property and hindi inventory. - sabi daw, malalaman kung capital or ordinary asset
Mga binebenta lang din.) base sa “actual use” nya
c) Personal property used in trade or business
subject to depreciation (trucks, office Guidelines in determining whether a particular real
equipment, lahat ng nag ddepreciate. Basta property is a capital or ordinary asset.
ginagamit nila to since “personal” nga ung
term)
 1. treated as ordinary asset under the following: - net capital loss is not an item of deduction against gross
a) Failure to operate a real estate business income. (treated lang daw to as unnecessary expenses
b) Changing business from real estate to non- since capital assets are not used in the business or trade
real estate of the taxpayer.)
c) Abandoned and Idle properties in a real
estate business Capital gains and losses on transactions involving capital
d) Property purchased for future use in the assets are subject to:
business
1. Capital gains tax
e) Transfer of real properties classified as
capital or ordinary asset in the hands of the a. Sale of shares of stocks of a domestic
seller/transferor: corporation not listed and not traded
 Tax free exchange by taxpayer not through stock exchange
engaged in real estate business to a b. Sale of real property in the Philippines held by as
taxpayer who is engaged in real estate capital asset.
business - Capital gains and losses subject to capital gains tax will
 Although not engaged in real estate no longer be considered in computing the gross income
business will use in business the property
subject to regular income tax rates.
received in the exchange
2. Regular income tax rates – the capital gains
2. treated as capital asset under the following: and losses other than those subject to CGT will
be considered in the determination of gross
a) Real property used by an exempt corporation income subject to the following rules:
in its exempt operations a. Holding period
b) Transfer of real properties classified as b. Loss limitation rule
capital asset or ordinary asset in the hands of the seller”
c. Net capital loss carry over

 If transferred through succession or donation

to the heir or done who is not engaged in the
real estate business and who does not
subsequently use such property in trade or
business.
 If received as dividend by the stockholders
who are not engaged in the real estate
business and who do not subsequently use
such real property in trade or business.

Net capital gain v net capital loss page 155

- net capital gain means the excess of the gains from sales
or exchanges of capital assets over the losses from such
sales or exchanges.
- net capital gain pag mas mataas ung losses vice versa.

Treatment of capital gains and losses

- Capital losses are deductible only up to the extent of
capital gains from dealings in capital assets other than
domestic stocks and real properties. (subjected na kasi
agad ung domestic stocks and real properties.)
- net capital gain is an item of gross income subject to
regular tax.