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    Capital Assets Ordinary Assets

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    jaypunzalan
    Capital assets are properties not used in a taxpayer's business and include shares of domestic stock, real property of individuals or land/buildings of corporations, and shares of foreign stock. Ordinary assets are used in a taxpayer's business and include stock in trade, property held primarily for sale to customers, depreciable property, and real property used in business. The classification of an asset as capital or ordinary depends on the taxpayer's business and determines whether gains from sale or exchange are capital gains or ordinary gains, with capital gains taxed preferentially for assets located in the Philippines.

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    Capital Assets Ordinary Assets

    Uploaded by

    jaypunzalan
    141 views2 pages
    Capital assets are properties not used in a taxpayer's business and include shares of domestic stock, real property of individuals or land/buildings of corporations, and shares of foreign stock. Ordinary assets are used in a taxpayer's business and include stock in trade, property held primarily for sale to customers, depreciable property, and real property used in business. The classification of an asset as capital or ordinary depends on the taxpayer's business and determines whether gains from sale or exchange are capital gains or ordinary gains, with capital gains taxed preferentially for assets located in the Philippines.

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    Capital assets are properties not used in a taxpayer's business and include shares of domestic stock, real property of individuals or land/buildings of corporations, and shares of foreign stock. Ordinary assets are used in a taxpayer's business and include stock in trade, property held primarily for sale to customers, depreciable property, and real property used in business. The classification of an asset as capital or ordinary depends on the taxpayer's business and determines whether gains from sale or exchange are capital gains or ordinary gains, with capital gains taxed preferentially for assets located in the Philippines.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    141 views2 pages

    Capital Assets Ordinary Assets

    Uploaded by

    jaypunzalan
    Capital assets are properties not used in a taxpayer's business and include shares of domestic stock, real property of individuals or land/buildings of corporations, and shares of foreign stock. Ordinary assets are used in a taxpayer's business and include stock in trade, property held primarily for sale to customers, depreciable property, and real property used in business. The classification of an asset as capital or ordinary depends on the taxpayer's business and determines whether gains from sale or exchange are capital gains or ordinary gains, with capital gains taxed preferentially for assets located in the Philippines.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Capital assets means any form of real property held by the taxpayer

    (whether or not connected with his trade or business) which are not
    included among ordinary asset classification. In short, the trader doesn’t
    use the property for his business.

    For tax purposes, there are three (3) general types of capital
    assets:

    1. shares of stocks of a domestic corporation


    2. real property (of individuals) or land or building (of
    corporations)
    3. other types of assets, including shares of stocks of a foreign
    corporation

    Ordinary assets are the properties that are used in business or trade by
    the taxpayer, or held by the taxpayer for sale to the customer in the
    ordinary course of the business.

    a. stock in trade of the taxpayer or other property of a kind which


    would properly be included in the inventory of the taxpayer if on
    hand at the close of the taxable year

    b. property held by the taxpayer primarily for sale to customers in


    the ordinary course of his trade or business

    c. property used in trade or business, of a character which is


    subject to the allowance for depreciation

    d. real property used in trade or business of the taxpayer

    - any gain resulting from the sale or exchange of an asset is a capital


    gain or an ordinary gain depending on the kind of asset involved in
    the transaction

    - capital gains are gains realized from the sale or exchange of capital
    assets

    - ordinary gains are gains realized from the sale or exchange of ordinary
    assets

    - where the real property is located outside the Philippines, the normal
    corporate income tax or the graduated income tax rates shall apply,
    even though such property is classified as a capital asset (the
    preferential rate of 6% applies only when such real property is situated
    within the Philippines)

    Guidelines

    The classification of a taxpayer’s assets would depend on the nature of


    their business.

    For example, in the case of real estate companies, ordinary business


    operations require the possession of properties instead of inventory. Thus,
    real properties are considered ordinary assets as they are necessary to
    day-to-day (or ordinary) operations.
    On the other hand, for any company not primarily engaged in the trade or
    selling of properties, these properties are considered capital assets.

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