F. Capital Gains Tax on Stock Transactions
1. History of the provision ........................................................ 298 2. Rates of tax............................................................................ 299 3. Nature and treatment of net capital gains and taxes imposed ....................................................... 299 4. Persons liable to the final capital gains tax ........................ 300 5. Exemptions from the capital gains tax................................ 300 6. Determination of fair market value of shares of stock not listed ........................................................ 300 7. Definition of “fair market value” of the shares of stock listed and traded ........................................................ 302 8. Basis for determining gain or loss from sale or disposition of shares ............................................... 302 9. Property acquired by purchase ............................................ 303 10. Property acquired by devise, bequest or inheritance.......... 303 11. Property acquired by gift...................................................... 306 12. Property acquired for inadequate consideration................. 306 13. Limitation of capital losses .................................................. 307 14. Installment sales of shares of stock not listed and traded in any local stock exchange ..................... 308 15. Time of payment of tax and manner of filing returns ......... 310 16. Effect on nonpayment of tax ................................................ 311 17. Penalties................................................................................ 311
THE LAW ON INCOME TAXATION
C. Capital Gains and Losses
1. Classification of assets .......................................................... 255 2. Definition of terms ................................................................ 256 3. Requisites for recognition of capital gain or loss ................ 257 4. Kinds of capital asset............................................................ 257 5. Rules on capital gains or losses of individuals.................... 258 6. Limitation on capital losses ................................................. 261 7. Philosophy underlying capital gains and losses.................. 263 8. Rules on capital gains or losses of corporations.................. 265 9. Other capital asset transactions .......................................... 267 10. Retirement of bonds.............................................................. 267 11. Gains and losses from short sales........................................ 267 12. Failure to exercise an option ................................................ 269 13. Securities becoming worthless ............................................. 269 14. Distribution in liquidation ................................................... 270 15. Taxation of preferred shares surrendered for cancellation or retirement..................................... 271 16. Cost and expenses of acquisition and disposition ............... 272
Chapter VIII. — Sources of Income
1. Sources of income in general ................................................ 312 2. Classification of income as to source .................................... 312 3. Importance of knowing source of income............................. 313 4. Gross income from sources within the Philippines............. 313 5. Enumeration in Section 42 not all-inclusive ....................... 317 6. Gross income from sources outside the Philippines............ 318 7. Gross income from sources partly within and partly outside the Philippines .................................... 321 8. Apportionment of deductions in computation of taxable income......................................................... 322 9. Taxable income from sources within the Philippines ......... 323 10. Income from personal property produced and sold............. 324 11. Income of foreign telegraph and cable companies .............. 326
D. Capital Gains Tax on Sale of Real Property
1. History of the provision ........................................................ 273 2. Basis of the tax...................................................................... 273 3. Individuals liable to the tax ................................................. 276 4. Nature of the tax................................................................... 276 5. Exemptions from the tax in case of sale of principal residence .................................................. 281 6. Filing of capital gains tax return and payment of tax ....... 282 7. Payment of creditable withholding tax and documentary stamp tax ....................................... 283 8. Issuance of Certificate Authorizing Registration/Tax Clearance Certificate ............................................................ 283
Chapter IX. — Taxation of Individuals
A. Classes of Individual Taxpayers
3. General principles of Philippine income taxation............... 328 4. Classification of taxpayers ................................................... 329 5. Persons considered citizens of the Philippines.................... 331 6. Resident and nonresident aliens ......................................... 331 xiv 1. Subjects and objects of income taxation .............................. 328 2. Persons taxable by the State ............................................... 328
E. Dealings in Stocks and Securities
1. Definition of terms ................................................................ 284 2. Dealings by a corporation in its own stock.......................... 285 3. Sale or retirement of corporate bonds ................................. 286 4. Definition of wash sale ......................................................... 289 5. Non-deductibility of losses on wash sale ............................. 289 6. Conditions for non-deductibility .......................................... 289 7. Meaning of “acquired” .......................................................... 291 8. Substantially identical stock or securities .......................... 291 9. Treatment of loss on wash sales .......................................... 291 10. Basis of stock or securities acquired in wash sales............. 296
B. Rates and Computation
1. Meaning of taxable income................................................... 332 2. Graduated rates of tax on gross income of citizens and resident aliens ...................................................... 333 3. Individuals earning purely compensation income ............. 334 4. Self-employed individuals earning income purely from self-employment or practice of profession ................. 336 5. 8% income tax rate option ................................................... 337 6. Availment of the 8% Option ................................................ 339 7. Comparison of the salient features between the graduated and 8% income tax rates .......................... 340 8. Individuals earning income both from compensation and from self-employment ........................................ 344 9. Summary ............................................................................... 348 10. Progressive scheme of taxation ........................................... 350 11. Income tax rates on nonresident alien individual ............. 350 12. Passive incomes subject to final income tax rates ............. 351 13. Interest income from long-term deposits or investment certificates ............................................... 352 14. Tax treatment of interest income on other transactions ................................................................ 356 15. Separate computation of income tax of spouses.................. 360 16. Computation of tax on nonresident citizens and resident aliens ..................................................... 362 17. Optional standard deduction by individual taxpayer ........ 363 18. Rates of tax on nonresident aliens ...................................... 364 19. Meaning of ‘‘engaged in trade or business’’ ......................... 365 20. Income of nonresident taxpayers not engaged in business in the Philippines ........................................ 366 21. Computation of tax on nonresident aliens ......................... 367
F. Capital Gains Tax on Stock Transactions
xiii
1. History of the provision ........................................................ 298 2. Rates of tax............................................................................ 299 3. Nature and treatment of net capital gains and taxes imposed ....................................................... 299 4. Persons liable to the final capital gains tax ........................ 300 5. Exemptions from the capital gains tax................................ 300 6. Determination of fair market value of shares of stock not listed ........................................................ 300 7. Definition of “fair market value” of the shares of stock listed and traded ........................................................ 302 8. Basis for determining gain or loss from sale or disposition of shares ............................................... 302 9. Property acquired by purchase ............................................ 303 10. Property acquired by devise, bequest or inheritance.......... 303 11. Property acquired by gift...................................................... 306 12. Property acquired for inadequate consideration................. 306 13. Limitation of capital losses .................................................. 307 14. Installment sales of shares of stock not listed and traded in any local stock exchange ..................... 308 15. Time of payment of tax and manner of filing returns ......... 310 16. Effect on nonpayment of tax ................................................ 311
68
Chapter X. — Taxation of Corporations A. Domestic and Foreign Corporations
Made with FlippingBook - Online Brochure Maker