CAPITAL ASSETS

1. Lots for rent when subsequently sold are classified as

a. Liquid assets
c. ordinary assets
b. Capital assets
d. fixed assets
2. A feature of ordinary gains as distinguished from capital gains
a. No holding period
c. Sources are capital assets
b. May or may not be taxable in full
d. gains from sale of assets not
included as inventory
3. The term capital assets includes
a. Real property not used in the trade or business of the taxpayer
b. Stock in trade or other property included in the taxpayers inventory
c. Property primarily for sale to customers in the ordinary course of his
trade or business
d. Property used in the trade or business of the taxpayer and subject to
depreciation
4. This is a capital asset
a. A residential land previously foreclosed by PNB and is now being offered
for sale to the public
b. A commercial building foreclosed by a lending institution
c. A 10-door apartment units owned by a retired government employee
d. A residential land owned by a practicing CPA
5. Holding period is the duration for which the taxpayer held the capital asset. A
capital asset held by the taxpayer for not more than 12 months is said to be
a. Short-term
b. medium-term c. long-term
d.
no-term
6. An individual taxpayer owns an eight-door apartment with a monthly rental of
P10,000 each residential unit. He sold this property to another individual
taxpayer. Which is not correct?
a. The seller is not liable to pay the capital gains tax
b. The property sold is a capital asset
c. The taxpayer is engaged in business
d. The rental income is subject to income tax using the graduated rates
7. Basic rule on sale of capital assets, except
a. Sale of real property located in the Philippines by a foreign corporation is
subject to 6% CGT based on selling price or FMV, whichever is higher
b. Sale of shares Of stock of a domestic corporation through the local stock
exchange or initial public offering is exempt from income tax
c. Sale of shares of stock of a domestic corporation through the local stock
exchange is subject to a final tax of 5% for the first P100,000 capital gain
and 10% for the excess
d. Sale of personal property located in the Philippines by a resident citizen is
subject to the rules on holding period
8. S1: Capital losses are deductible from ordinary gains but net capital loss is
not deductible from ordinary gains.
S2: Ordinary losses are deductible only to the extent of the capital gains but
the net capital loss is not deductible from ordinary gain.
a. True, True
b. True, False
c. False, False
d.
False, True

9. S1: As a general rule, the entire amount of the gain or loss arising from
dealings in property is a taxable gain or a deductible loss.
S2: An individual is qualified to account for his gain on instalment basis if the
initial payment exceeds 25% of the selling price.
a. True, True
b. True, False
c. False, False
d.
False, True
10.S1: Ordinary gain includes capital gains such as those derived from the
performance of services, whether personal or professional, and those
accruing from business.
S2: Stocks held by dealers in securities are classified as capital assets.
a. True, True
b. True, False
c. False, False
d.
False, True
11.Where the taxpayer is a corporation, which of the following statement is true?
a. The holding period does not apply to corporation, hence, capital gains and
losses are recognized at 50%
b. The net capital loss can be carried over in the next succeeding year
c. Capital loss is deductible only to the extent of ordinary gains
d. Ordinary loss is deductible from capital gains
12.Where the taxpayer is a corporation, the following rules as to recognition of
capital gains or losses from the disposition of property classified as capital
asset shall apply. Which is the exception?
a. The holding period does not apply to corporation, hence, capital gains and
losses are recognized at 1000%
b. Net capital loss carry should not exceed the net income in the year the
loss was incurred.
c. Ordinary losses are deductible from capital gains but net capital loss
cannot be deducted from ordinary gain.
d. Capital losses are deductible only to the extent of capital gains
13.The following rules as to recognition of capital gains or losses from the
disposition of personal property classified as capital asset apply where the
taxpayer is an individual. Which is the exception?
a. Net capital loss carry over in a taxable year should not exceed the capital
gain in the year the loss was incurred.
b. Depending on the holding period, the percentages of gain or loss is 100%
if the capital asset has been held for 12 months or less and 50% if the
capital asset has been held for more than 12 months.
c. Capital losses are deductible only to the extent of the capital gains; hence,
the net capital loss is not deductible
d. Ordinary losses are deductible from capital gains but net capital loss
cannot be deducted from ordinary gain.
14.M sold his principal residence at a selling price of P5M but with FMV of P6M.
The property sold was acquired for P3M. He purchased his new principal
residence at a cost of P7M. The capital gains tax is
a. P360,000
b. P300,000
c. P240,000
d. P0
15.Using the above information, how much is the basis of the new principal
residence?
a. P7M
b. P6M
c. P5M
d. P4M
16.If only P4M out of P5M was utilized in acquiring his new principal residence,
the capital gain tax is

a. P60,000
P360,000

b. P72,000

c. P300,000

d.

17.Using the preceding number, the basis of the new principal residence is
a. P3.2M
b. P4M
c. P2.4M
d. P3M
18.Which of the following statements is true?
a. The sale by a corporation of its office building shall not result to a capital
gain even if it derived a gain of P240,000 on the sale.
b. A corporation which sold for P120,000 in 2015 an equipment which it
acquired in 2008 for P180,000 shall report only a capital gain of P30,000
in 2016.
c. A corporation with a net capital loss of P50,000 and a net income of
P40,000 in 2015 can carry over only a maximum amount of P40,000 in
2016.
d. A corporation with a net capital loss of P50,000 in 2015 can carry over
such amount only until 2016.
19.Rules on capital gains and losses of corporations, except
a. There is a final tax of 5% on real property sold
b. Capital gains and losses are recognized to the extent of 100% regardless
of the holding period.
c. The net capital loss carry over is not applicable.
d. Capital losses are deductible only to the extent of capital gains.
20.Jane has a taxable income of P200,000 for 2015 excluding capital gains and
losses. For 2015, Jane, incurred a net long-term loss of P8,000. What amount
of the capital loss can Jane offset against 2015 ordinary income?
a. P0
b. P3,000
c. P4,000
d. P8,000
21.A bought from B Corporation 10 shares of stock. Sixty days thereafter, the
corporation was adjudged bankrupt and its stock as worthless. The loss of A
to be reported for income tax purposes is classified as
a. A wagering loss
c. Non-deductible loss for income tax
purposes
b. Short-term capital loss
d. casualty loss
22.On August 15, 2015, Mr. Cruz sold a 500-square meter residential house for
P3,000,000. The house was acquired in 2002 of P2M. On the date of sale, the
FMV of the house as shown in the real property declaration was P2.5M and
the assessors value amounted to P2.2M. The zonal value was P7,000 per
square meter. The capital gains tax is
a. P120,000
b. P150,000
c. P180,000
d.
P210,000
23.The capital gains tax of Mr. Cruz if the proceeds of sale was utilized in
acquiring a new residence.
a. P210,000
b. P150,000
c. P180,000
d.
none
24.The amount to be deposited in escrow if the proceeds of the sale shall be
utilized in acquiring a new residence
a. P210,000
b. P150,000
c. P180,000
d.
none

25.ABC Corp. realized an ordinary gain of P400,000. Its capital asset transactions
during the year are as follows:
Holding period
Amount
Capital gain
6 months
P 50,000
Capital gain
2 years
45,000
Capital loss
12 months
23,000
Capital loss
10 years
28,000
What is ABCs taxable income?
a. P484,000
b. P444,000
c. P435,500
d.
P44,000
26.Mrs. Sy owns a parcel of land worth P500,000 which she inherited from her
father in 2012 when it was worth P300,000. Her father purchased it in 2000
for P100,000. If Mrs. Sy transfers this parcel of land to her wholly owned
corporation in exchange for shares of stock of said corporation worth
P450,000, her taxable gain is
a. P0
b. P50,000
c. P150,000
d.
P350,000
27.Jon had the following data on income and losses:
2014
2015
Ordinary business income
P56,700
P60,800
Interest on time deposit with BDO
2,000
3,000
Short-term CG
5,000
8,500
Long-term CG
3,600
5,200
Short-term CL
8,000
2,900
Long-term CL
4,400
In 2014, the taxable income before personal exemption of Jon is
a. P58,700
b. P53,300
c. P66,700
d. P56,700
28.Using the preceding information, taxable income of Jon for 2015 is
a. P15,600
b. P36,000
c. P69,000
d.
P45,600
29.Beauty Corp., a domestic corporation, has the following data for 2014, its first
year of operations:
Gross profit from sales
P2,000,000
Dividend from domestic corporation
20,000
Capital gain on land in the Philippines held for 2 yrs.
sold at P1M
200,000
Capital gain on shares of domestic corp held for
2 months sold directly to a buyer
120,000
Business expenses
1,100,000
Capital loss on bonds of domestic corporation
Held for 6 months
30,000
The total capital gains tax for the year is
a. P270,000
b. P64,000
c. P67,000
d. P54,000
30.The income tax due of Beauty Corp. at the end of the year is
a. P270,000
b. P315,000
c. P306,000
d.
P357,000
31.On different dates as listed below, Mr. Bening purchased ordinary shares of
ABC Corporation. On May 31, 2016, he received a 50% stock dividend.

Lot
No.
1

Date
# of
Cost per Total
Purchased
shares
share
Cost
Oct. 31,
400
P100
P40,000
2015
2
Jan. 15,
300
120
36,000
2016
3
Mar. 15,
200
140
28,000
2016
4
May 15,
100
150
15,000
2016
On June 30, 2016, Mr. Bening sold 1,400 shares at P100 per share. Using FIFO
method, the gain (loss) of Mr. Bening is
a. P31,000
b. P(26,600)
c. P28,938
d. P21,000
32.Using the same information but assuming weighted average was used, the
gain (loss) of Mr. Bening is
a. P31,000
b. P(26,600)
c. P28,938
d. P21,000