Reviewer in Taxation (Book 1) Asser S.

Tamayo (2012 Edition)

Chapter 8
CAPITAL GAINS TAX AND
DOCUMENTARY STAMP TAX

Multiple Choice: Choose the best possible answer

1. The tax base and the tax rates of the capital gains tax on the sale of shares of stocks not
traded in the stock exchange shall be:
I- The net capital gain
II- 5% on the first P100,000; 10% on excess of P100,000
a. Both I and II are correct c. only I is correct
b. Neither I nor II is correct d. Only II is correct

2. When is the capital gains tax return filed by a natural or juridical person, resident or nonresident,
who is not exempt under existing laws for the sale, barter, exchange or other onerous disposition
intended to transfer ownership of shares of stocks in domestic corporation classified as capital
assets, not traded through the local stock exchange?
I- Within 30 days after each cash sale, barter, exchange or other disposition of shares of stock
not traded through the local stock exchange
II- In case of installment sale, the return shall be filed within 30 days ff. the receipt of the first
down payment and within 30 days following each subsequent installment payment
a.Both I and II are correct c. Only I is correct
b. Both I and II are incorrect d. Only II is correct
3. When is the filing of the anual capital gains tax returns for onerous transfer of shares of stock not
traded through the local stock exchange covering all transactions of the preceding taxable year?

a. within thirty (30th) days after the end of the taxable year

b. on or before the fifteenth (15th) day of the fourth (4th) month following the close of the taxable
year

c. on or before the fifteenth (15th) day of the third (3rd) month following the close of the taaxable
year

d. within fifteen (15) days after the end of the taxable year

4. where is the capital gains tax return for onerous transfer of shares of stock not traded through the
local stock exchange filed?

I- Authorized agent bank (AAB) under the jurisdiction of the RDO where the seller/transferor is
required to register

II- In places where there are no Authorized City or municipal treasurer of the RDO where the
seller/transferor is required to register
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

a. Both I and II are correct c. Only I is correct

b. Both I and II are incorrect d. Only II is correct

5. In the case of cash sale o f shares of stock not traded through the local stock exchange, the
selling price shall be the:

a. total consideration per deed of sale

b. sum of money and the fair market value of the property received

c. fair market value of the property received.

d. none of the choices

6. In case of exchange of shares of stick not traded through the local stock exchange, the selling price
shall be the:

a. total consideration per deed of sale.

b. sum of money and the fair market value of the property received

c. FMV of the propertybreceived

d. None of the choices

7. In case the fair market value of the shares of stock sold, bartered, or exchanged is greater than the
amount of money and/or fair market value of the property received, the excess of the fair market
value of the shares of stock sold, bartered or exchanged over the amount of money and fair market
value of the property, if any, received as consideration shall be deemed a:

a.gift subject to the donor's tax c. dividend distribution

b. taxable income d. none of the choices

8. In the case of shares of stock not listed and traded in the local stock exchanges, what shall be
considered as the fair market value?

a. the closing price on the day when the shares are sold, transferred or exchanged

b. The book value of the shares of stock as shownin the financial statements duly certified by a
independent certified public accountant nearest to the date of sale

c. The acquisition cost of the shares sold, transferred or exchanged

d, The selling price or the bid price nearest to the date of sale as published in any newspaper or
publication of general circulation, whichever is higher

9. In the case of a unit participation in any association, recreation or amusement club (such as golf,
polo, or similar clubs), the fair market value thereof shall be the:
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

a, closing price on the day where the shares are sold, transferred or exchanged.

b. book value of the shares of stock as shown in the financial statements duly certified by an
independent certified public accountant nearest to the date of sale

c.The acquisition cost of the shares sold, transferred or exchanged

d, The selling price or the bid price nearest to the date of sale as published in any newspaper or
publication of general circulation, whichever is higher

10. which of the following statements are correct?

a. The gain from the sale or other disposition of shares of stock shall be the excess of the amount
realized therefrom over the basis or adjusted basis for determining gain.

b. The loss from the sale or other disposition of shares of stock shall be the excess of the basis or
adjusted basis for determining loss over the amount realized

c. The amount realized from the sale or other disposition of property shall be the sum of money
received plus the fair market value of the property (other than money) received, if any

d. None of the choices

11. The cost basis for determining the capital gains or losses for shares of stock acquired through
purchase shall be governed by which of the ff. rules?

a. If the shares of stock can be identified, then the cost shall be the actual purchase price plus all costs
of acquisition, such as commissions, documentary stamp taxes, transfer fees, etc.

b.if the shares of stock cannot be properly identified, then the cost to be assigned shall be computed
on the basis of FIFO method

c. If the books of accounts are maintained by the seller where every transaction of a aprticular stock is
recorded, then the moving average method shall be applied rather than the FIFO method.

d. All of the above

12. Five (5) shares of stock in XYX Co. were acquired at a toatal cost of P 1,000.00 or at two hundred
pesos per share (Php 200/share). XYX Co. declared and issued five (5) shares of stock as stock
dividend.

How much is the cost basis for each of the ten (10) shares of stock?

a. P200 c. P 100

b. P 150 d. none of the choices

13. First statement: if the property was acquired by devise, bequest or inheritance, the basis shall be
the fair market value of such property at the time of death of the decedent.
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

Second statement:If the Property was acquired by gift, the basisshall be the same as it would be in
the hands of the donor or the last preceding owner by whom it was not acquired by gift, except that if
such basis is greater than the FMV of the property at the time of the gift, then for the purpose of
determining the loss, the basis shall be such fair market value.

a. Both statements are correct

b. Both statements are incorrect

c. only the 1st statement is correct

d. only the 2nd statement is correct

14. Assume that Mr. Era bought shares of stock in 1970 at a cost of P100,000. he donated these shares
to Mr. Aioon Jan. 1, 1998, during which time, the said shares has a fair market value of P1,000,000
and on the basis of such FMV, Mr, Era paid the corresponding donor's tax. Mr Aio the donee, sold the
shares on Jan. 1, 1999 for a consideration of P 2,000,000.

How much is the capital gain (loss) from sale of sale of shares of stock?

a. P1,900,000 c.P950,000

b. P1,000,000 d. P500,000

15. Assume that Mr. Ehl sold to Mr. Nash, shares of stock for consideration of of P1,000,000. At the
time of the sale, its FMV is P3,000,000. Mr NAsh later on sells this property for P2,000,000. How
much i scapital gain (loss)?

a. P2,000,000 c. (P1,000,000)

b. P1,000,000 d, (P 500,000)

16. First statement: For slae barter, exchange of other forms of disposition of shares of stock subject
to the 5%/10% capital gains tax on the net capital during the taxable year are deductible only to the
extent of capital gains from the same typeof transaction during the same period.

Second Statement: IF the transferor of shares is an individual, the rule on holding period and
capital loss carry-over will not apply, notwithstanding the provisions of section 39 of the tax code as
amended.

a.Only First statement is correct.

b. Only second statement is correct.

c. Both are correct

d. Both are incorrect

17. Which of the ff. statements is incorrect?

Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

a. losses from shares of stock, held as capital asset, which have become worthless during the taxable
year shall be treated as capital loss as of the end o the year

b. Loss from shares of stock, held as capital asset, which have become worthless is not deductible
against the capital gains realized from the sale, barter, exchanged or other forms of disposition of
shares of stock during the taxable year, but must be claimed against other capital gains to the extent
provided for under Sec. 34 of Tax Code as amended.

c. For the 5% and 10% net capital gains tax to apply, there must be an actual disposition of shares of
stock held as capital asset, and the capital gain and the capital loss used as the basis in determining
net capital gain, must be derived and incurred respectively from a sale, barter, exchange or other
disposition of shares of stock.

d. None of the choices

18. The documentary stamp tax on all sales, or agreement to sell or memoranda of sales, or deliveries,
or transfer of due-bills, certificates of obligation, or shares of certificates of stocks is based on:

a. Purchase price c. par value

b. Book Value d. Fair value.

19. The amount of documentary stamp tax on all sales, or agreement to sell, or memoranda of sales,
or deliveries, or transfer of due-bills, certificates of obligation, or shares or certificates of stock is:

a. 0.75 centavos on each P1,000 of selling price

b. 0.75 centavos on each P200, or fractional part thereof, of the par value

c. 0.75 centavos on each P200, or fractional part thereof, of the fair market value.

d. P1.00 on each P200, or fractional part thereof, of the par value

20. In the case of stock without par value, the prescribed amount of the documentary stamp tax is
equivalent to what percent of the documentary stamp tax paid upon the original issue of said stock?

a. 30% c. 10%

b.25% d. 5%

21. How much final tax is imposed upon capital gains presumed to have been realized from the sale ,
exchanged , or other disposition of real property located in the Philippines, classified as capital asset?

a. 10% capital gains tax c.5 % capital gains tax

b.6 % capital gains tax d. 4% capital gains tax

22. What is the tax base of the capital gains tax on slae of real property classified as capital asset?

a. Capital gain
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

b. Gross selling price

c. current FMV

d. Gross selling price or current FMV, whichever is higher

23. Which of the ff. is not subject to the 6% capital gains tax?

a. gains presumed to have been realized frm the sale, exchange, or other disposition of real property
located in the Philippines classified as capital asset

b. Pactode retro sale of real property by individuals, includig estates and trusts

c. Other forms of conditional sale of real property, by individuals including estates and trusts

d. None of the choices

24.

If real property classified as capital asset is sold to the gov't or any of its politicalsubdivisions or
agencies or GOCC's, the tax shall be

Option I- 6% capital gains

Option II- Section 24 (A)

a. both options are correct c. Only I is correct

b. None is correct d. Only II is correct

25.Capital gains presumed to have been realized from the sale or disposition of their principal
residence by natural persons, the proceeds of which is fully utilized in acquiring or constructing a
new principal residence within eighteen (18) cakendar months from the date of sale or disposition,
shall be:

a, subject to 6% capital gains tax

b. subject to 5% capital gains tax

c. exempt from the capital gains tax.

d. none of the choices

26. The commissioner of Internal Revenue shall be duly notified by the tax payer within how many
days from the date of sale or disposition of the principal residence through a prescribed return of his
intention to avail from the tax exemption from capital gains tax?

a. 60 days c. 15 days

b. 30 days d. 10 days
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

27. The tax exemption from the capital gains tax can only be availed of once every:

a. 10 years c. 18 months

b. 5 years d. 10 months

28. If there is no full utilization of the proceeds of sale or disposition, the portion of the gain
presumed to have been realized from the sale or disposition shall be:

a. exempt from capital gains tax

b. subject to 6% capital gains tax

c. subject to 5% capital gains tax

d. none of the choices

29. How much final tax is imposed on the gain presumed to have been realized on the sale, exchange
or disposition of lands and / or buildings which are not actually used in the business of a corporation
and are treated as capital assets?

a. 10% capital gains tax c.5% capital gains tax

b. 6% capital gains tax d. 4% capital gains tax

30. What is the basis of the capital gains tax on sale of land and/ or building classiied as capital asset
by a domestic corporation?

a. capital gain

b. Gross selling price

c, Current FMV

d. Gross selling price or Current FMV, whichever is higher.

31. When is the capital gains tax return for onerous transfer of real property classified as capital asset
(both taxable and exempt) filed?

I-within 30 days following each sale, exchange or disposition of real property

II- In caseof installment sale, within 30 days following the receipt of the 1st down payment and
within 30 days following each subsequent installment payment

a. Both I and II are correct c. Only I is correct

b. Both I and II are incorrect d. Only II is correct

32. Which of the following statements is incorrect?

Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

a. One capital gains tax return is filed for every transfer document regardless of the number of each
property sold, exchanged or disposed of.

b. The capital gains tax return is filled by all persons (natural or juridical) whether resident or
nonresident, including estates and trusts, who sells, exchanges or dispose of a real property located in
the Philippines and classified as capital asset for the purpose of securing a Tax Clearance Certificate
to effect transfer of ownership (title) of the property from the seller to buyer

c. The capital tax is filed with the RDO having jurisdiction over the place where the property is
located

d. None of the choices.

33. Filing of the capital gains tax return is no longer required when the real property transaction
involves which of the following?

a. The real property is not located in the Philippines

b. The disposition of the real property is gratuitouos.

c. The disposition of the real property is pursuant to the Comprehensive Agrarian Reform

d. All of the Choices

34.The documentary stamp tax on deeds of sale and conveyance of real property is based on:

a. acquisition cost

b. consideration contracted to be paid for such realty

c. consideration contracted to be paid for such realty or on its fair market value, whichever is higher

d. actual cash payment

35. When on eof the contracting parties is the Government the documentary stamp tax imposed shall
be based on the:

a. actual consideration

b.consideration contracted to be paid for such realty

c. consideration contracted to be paid for such realty or in its fair market value, whichever is higher

d. none of the choices

36. How much is the documentary stamp tax on deeds of sale and conveyance of real property?

I- P15.00 when the consideration, or value received or contracted to be paid for such realty after
making proper allowance of any encumbrance, does not exceed One thousand pesos (P1,ooo)
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

II- P15.00 for each additional P1000, or fractional part thereof in excess of P1000 of such
consideration or value.

a. Both are correct c. Only I is correct

b. Both are incorrect d. Only II is correct

37. Except as provided by the rules and regulations promulgated by the secretary of finance, upon
reccomendation of Commissioner of Internal Revenue, the documentary stamp tax return shall be
filed within how many days after the close of the month when the taxable document was made,
signed, issued, accepted, or transferred?

a. 2o days c. 10 days

b. 15 days d, 5 days

38. When is the documentary stamp tax paid?

a. Within 30 days after the sale of the real property or shares of stock

b. On or before the 15th day after the close of the month

c. Within 15 days after the document is signed

d. As the documentary stamp tax return is filed

39.Where is the documentary stamp tax is filed?

I- through the authorized agent bank within the territorial jurisdiction of the Revenue District
Office which has jurisdiction over the residence or the principal place of business of the taxpayer

II- In places where there is no authorized agent bank, the return shall be filed with RDO,
collection agent, or duly authorized treasurer of the cty or municipality in which the taxpayer has his
legal residence or principal place of business.

a. Both I and II are correct c. Only I is correct

b. Both I and II are incorrect d. Only II is correct

40. What is the alternative method of paying the documentary stamp tax?

a. paying additional capital gains tax

b. Using the tax witheld as payment

c. Imprinting the stamps through a documentary stamp metering machine on the taxable document

d, None of the choices

41.What shall be the effect of failure to pay or affix the documentary stamp tax on the instrument,
document or paper which is required by law to be stamped?
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

a. The instrument, document or paper shall not be recorded

b. The instrument, document or paper or any copy tereof or any recordof the same shall be admitted
or used in evidence in any court

c. No notary public or other officer authorized to administer oaths shall add his jurat or
acknowledgement to any document

d. All of the choices

42. An individual taxpayer held shares of stock as investment. During the current year, he sold the
shares he bought for P100,000 to a directbuyer for P180,000. he incurred P30,000 selling expenses in
connection with the sale.

How much was the capital gains tax on the sale if any?

a. P8,000 c. P4,000

b. P4,800 d. P2,500

43. An individual taxpayer holds shares of stock as investment which he bought for P500,000. During
the current year, he sold it directly to a buyer for P750,000.

How much is the capital gains tax, if any?

a. P25,000 c. P12,500

b. P20,000 d. None

44, An individual taxpayer invested P300,000 in the common shares of SMC Corp. During the
Current Year, he sold these shares directly to a buyer for P250,000.

How much is the capital gains tax on the sale, if any?

a. P25,000 c. P3,750

b. P12,500 d. None

45.An individual taxpayer owns several pieces of land which are classified as capital assets. He has
the ff. data for the current year:

Lot 1 Lot 2 Lot 3

Selling Price P 3,000,000 P4,000,000 P5,000,000

Less: Cost ( 1,500,000) (3,000,000) (6,500,000)

Gain (loss) P1,500,000 P1,000,000 P1,500,000

FMV, time of sale P2,500,000 P5,000,000 P7,000,000

Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

How much is the capital gains tax on the above sales?

Lot 1 Lot 2 lot 3

a. P 180,000 P300,000 P420,000

b. P150,000 P240,000 P300,000

c. P 90,000 P 60,000 P None

d. None none None

46. On January 2, 2011,an individual taxpayer, resident citizen, sold his residential house for P
3,000,000 (FMV, time of sale , P 5,000,000). He intends to use the proceeds to build a new principal
residence within 18 calendar months from the date of sale. He notified the BIR within 30 days from
the date of sale of his intention.

Question 1: How much is the capital gains tax due and taxable?

a. P300,000 c. P180,000

b. P200,000 d. none

Question 2: Assuming that the individual taxpayer utilized only P1,000,000 of the proceeds to build a
new principal residence, how much is the capital gains tax due and payable?

a. P300,000 c. P180,000

b. P200,000 d. None

47. Mr. C. Avenido acquired his principal residence in 2009 at a cost of P1,000,000. He sold the said
property on January 1, 2011, with a fair market value of P5,000,000 for a consideration of
P4,000,000. Within the 18-month reglementary period he purchased his new principal residence at
cost of P7,000,000.

Question 1: How much is the capital gains tax due?

a. P420,000 c. P240,000

b. P300,000 d. None

Question 2: How much is the basis of the new principal residence?

a. P4,000,000 c. P1,000,000

b. P3,000,000 d. None of the choices

48. Mr. C, Avenido acquired his principal residence in 2009 at a cost of P1,000,000. He sold the said
property on January 1, 2011, with a fair market value of P5,000,000 for a consideration of
P4,000,000. Mr. Avenido acquired his new principal residence within the 18-month reglementary
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

period but did not utilize the entire proceeds of the sale in acquiring his new principal residence
because he only used P3,000,000 thereof in acquiring his new principal residence.

Question 1: How much is the capital gains tax?

a. P420,000 c. P75,000

b. P240,000 d. None

Question 2: How much is the basis of the new principal residence?

a. P4,000,000 c. P1,000,000

b. P2,000,000 d. P 750,000

49. Mr. E. Mateo assigned and conveyed his principal residence to ABC Realty Corp. in exchange for
a condominium unit which Mr. Mateo will use as his new principal residence.

What are the tax cinsequences of this exchange?

a. Mr. E. Mateo is exempt from capital gains tax while ABC Realty Corp. shall be subject
to income tax.

b. Mr. E. Mateo and ABC Realty Corp. shall be exempt from capital gains tax.

c. Both Mr. E Mateo and ABC Realty Corp. shall be subject to income tax

d. None of the choices

50. Mr J. Bala disposed his principal residence in exchange for a parcel of land. The land received in
exchange shall be used for the construction of his new principal residence. The following shall be the
tax consequences of the exchange:

I- Mr. J. Bala shall be exempt from capital gains tax.

II- The owner of the land shall be subject to capital gains tax or income tax.

a. Both I and II are correct c. Only I is correct

b. Neither I nor II is correct d. Only II is correct

51. Mr. Mendoza assigned and conveyed his principal residence with FMV of P4,000,000 and in
addition pad P2,000,00 to acquire as new principal residence of Ms. Co. Ms. Co. on the other hand,
conveyed principal residence to Mr. Mendoza with Fair Market value ofP5,000,000, with the
intention of making the property received from Mr. Mendoza as her new principal residence. The
historical cost of the old principal residence of Mr. Mendoza is P1,000,000 while the historical cost of
the old principal residence of Ms. Co is P500,000.

Question 1: How much was the capital gains tax due on the exchange of property by Mr. Mendoza?

a. P500,000 c. P60,000
Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

b. P360,000 d. None

Question 2: How much is was the cost basis of the new principal residence of Mr. Mendoza?

a. P 4,000,000 c. P500,000

b. P 3,000,000 d. P416,667

Question 3. How much was the capital gains tax due from Ms. Co.?

a. P500,000 c. P60,000

b. P360,000 d. None

Question 4: How much was the cost basis of the new principal residence of Ms. Co.?

a. P4,000,000 c. P500,000

b. P3,000,000 d. P416,667

52. Ms. Sheila Gutierrez sold her residential house under the following terms:

cash received, January 10, 2011 P 100,000

Amount received, June 10, 2011 100,000

Installment due, June 10, 2012 600,000

Additional information:

Cost of land 150,000

Mortgage Assumed by the buyer 200,000

Mortgage on the land executed by buyer in

favor of the seller to guarantee payment 600,000

Question 1: How much is the capital gains tax due in 2011?

a. P600,00 c. P17,647

b. P42,353 d. P10,588

Question 2: How much is the documentary stamp tax?

a. P100,000 c. P15,000

b. P50,000 d. None of the choices

Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

53. On July 1, 2011, Ms. Cris Lingao sold shares of stock for P200,000. The shares, acquired on June
1, 2009 at a cost of P150,000 were held as investment, and were sold directly to a buyer under the
following terms:

Down payment, July 1, 2011 P 20,000

Installment due, October 10,2011 30,000

Installment due, October 10,2012 75,000

Installment due, October 10,2013 75,000

Question 1: How much was the capital tax due in 2011?

a. P 2,500 c. P 625

b. P 937.50 d. P 562.5

Question 2: How much is the documentary stamp tax?

a. P 2,500 c. P 625

b. P 937.50 d. P 562.5

54. Mr. Juan Juanico has the following transactions involving shares of stock sold not through the
local stock exchange:

Date Selling Price Fair Market Value Cost

January 15, 2011 P150,000 P120,000 P100,000

March 15, 2011 300,000 320,000 150,000

October 15,2011 250,000 220,000 300,000

December 15, 2011 350,000 300,000 250,000

Question 1: How much is the capital gains tax due for the sale on December 15, 2011?

a. P12,000 c. P2,500

b. P 5,000 d. None of the choices

Question 2: How much is the capital gains tax payable (refundable) when the consolidated return is
filed on or before April 15 of the succeeding year?

a. P12,000 c. P2,500

b. P 5,000 d. None of the choices

55. Candelaria Corporation, domestic, has the following data in 2011:

Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

Operating expenses 100,000

Interest on bank deposit, BPI Makati 50,000

Yield from deposit substitute, Manila 20,000

Dividend from a resident foreign corp.

(60% of business in the Phil.) 100,000

Dealings in properties:

a. Real Properties (capital asset)

Land Vacant lot

Selling price P 200,000 P 500,000

Cost (2004) 50,000 200,000

Down Payment(2006) 200,000 100,000

Installment (2007) - 150,000

Installment (2008) - 250,000

b. Personal properties

Car Office

(Capital Asset) Equipment

Selling Price P 150, 000 P 200, 000

Cost (2007) 80,000 120, 000

Accum. depreciation - 80,000

Down Payment (2009) 30, 000 50,000

Installment (2010) 50,000 75,000

Installment (2011) 70,000 75,000

c. Shares of stock not listed and traded in the local stock exchange

Selling Price P 150,000

Cost (2007) 10,000

Reviewer in Taxation (Book 1) Asser S. Tamayo (2012 Edition)

Down Payment 30,000

Installment (2010) 50,000

Installment (2011) 70,000

Question 1. How much is the final tax on the passive income in 2011?

a. P24,000 c. P10,000

b. P14,000 d. Choice not given

Question 2: How much is the capital gains tax in 2011?

a. P39,000 c. P19,200

b. P24,000 d. P15,000

Question 3: How much is the returnable capital gain in 2011 from the sale of car?

a. P70,000 c. P32,667

b. P37,333 d. None

Question 4: How much is the returnable gain in 2011 from the sale of office equipment?

a. P160,000 c. P60,000

b. P 80,000 d. P 30,000

Question 5: How much is the taxable net income in 2011?

a. P597,333 c. P492,667

b. P592,667 d.Choice not given