Juan operates a grocery in Baguio City as sole proprietor. An adjoining lot is used as parking area of his customers. In 2017, due to a business reversal, Juan disallowed the use of the lot as parking space for customers and contemplated on selling it. It was only recently, in June 2021, that Juan was able to sell the lot at a gain. a. The gain is subject to capital gains tax.b. The gain is subject to regular income tax.c. The gain is subject to final withholding tax on passive income. d. The gain is tax exempt. Identify a false statement:a. Capital Gains Tax is a tax imposed on thegains realized by the seller from the sale,exchange, or other disposition of certaincapital assets located in the Philippines,including pacto de retro sales and otherforms of conditional sale.b. Under NIRC, the capital gains tax on thesale of domestic stocks sold directly tobuyer is a final tax.c. Under NIRC, The capital gains tax on thesale of real property located in thePhilippines and classified as capital asset isa final tax.O d. None of the aboveO e. All of the above

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Answered: Juan operates a grocery in Baguio City…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Juan operates a grocery in Baguio City as sole proprietor. An adjoining lot is used as parking area of his customers. In 2017, due to a business reversal, Juan disallowed the use of the lot as parking space for customers and contemplated on selling it. It was only recently, in June 2021, that Juan was able to sell the lot at a gain.

a. The gain is subject to capital gains tax.

b. The gain is subject to regular income tax.

c. The gain is subject to final withholding tax on passive income.

d. The gain is tax exempt.

Identify a false statement:
a. Capital Gains Tax is a tax imposed on the
gains realized by the seller from the sale,
exchange, or other disposition of certain
capital assets located in the Philippines,
including pacto de retro sales and other
forms of conditional sale.
b. Under NIRC, the capital gains tax on the
sale of domestic stocks sold directly to
buyer is a final tax.
c. Under NIRC, The capital gains tax on the
sale of real property located in the
Philippines and classified as capital asset is
a final tax.
O d. None of the above
O e. All of the above

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

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