DEALINGS IN

PROPERTIES
Dealings in property

– Involve the sale, exchanges and other disposition of

properties such as ordinary assets or capital assets.
– Dealings in ORDINARY assets= subject to regular tax
– Dealing in CAPITAL assets OTHER THAN domestic stocks
and real properties= Subject to Regular tax
Determination of gains or losses
in Dealings in property
Selling price Pxxx
Less: Tax basis or adjusted basis of the asset
disposed xxx
Gain of loss Pxxx
What is selling price?

Selling price includes the amount realized from the

sale and other disposition of property which shall
include:
1. Sum of the money received and
2. Fair value of non-cash properties received
What is the tax basis?

1. For assets acquired by purchase, the tax basis is

a. Acquisition cost for : capital assets, non-
depreciable assets *includes purchase price, tax assumed
and acquisition related costs
b. Depreciated cost = for depreciable ordinary assets
2. Other assets received by exchange = FV of the asset
received
What is the tax basis?

3. For assets received by gratuitous title

a. Donation – whichever is LOWER of
(i) tax basis on the hands of the donor or the last
preceding owner whom it was NOT acquired by donation
(ii) fair value at the date of the gift
b. Inheritance = FV of the property at the date of death of the
decedent
Tax treatment of Capital Gains
and losses
– Capital losses MAY ONLY be ducted from Capital gain
– Net Capital Gain = item of gross income
– Net Capital Loss = NOT an item of deduction
HOLDING PERIOD

If capital asset is held by an individual taxpayer for a period of:

1. Short term= not more than 1 year= 100% of Capital gain of loss is
recognized
2. Long-term= more than 1 year= 50% is recognized

NOTE: Holding period applies for Individual taxpayers only.

For corporate taxpayer= regardless of the length holding period =
100% recognized
Net Capital Loss Carry Over
(For Individuals only)
Individual taxpayers are allowed to carry-over net capital loss as a
deduction against NET CAPITAL GAIN OF THE FOLLOWING YEAR
subject to the following limits:

Limit 1: The amount of NET INCOME in the year the capital loss is
sustained (inclusive of dealings in ordinary assets), and
Limit 2: The available NET CAPITAL GAIN in the following year
NOTE: NCLCO is strictly ONE YEAR ONLY.