On August 30, 2020, AAA Company purchased a tract of land for P12,000,000. AAA incurred additional cost of P3,000,000 during the remainder of 2020 in preparing the  land for sale. The tract was subdivided into residential lots as follows:  Lot class Number of lots Sales price per lot  A 100 240,000  B 100 160,000  C 200 100,000  Using the relative sales value method, what amount of cost should be allocated to Class  C lots?

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.