2013 (Taxation) Bar Exam Questions: Essay Question 11

[Discuss/answer the question below. Or see Taxation Instructions; Taxation Essay Questions: 12, 3, 4, 5, 6, 7, 8, 9, 10, and 12; Taxation Multiple Choice Questions: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19 and 20; See also 2013 Bar Exam: Information, Discussions, Tips, Questions and Results]

XI.

In 2000, Mr. Belen bought a residential house and lot for P1,000,000. He used the property as his and his family’s principal residence. It is now year 2013 and he is thinking of selling the property to buy a new one. He seeks your advice on how much income tax he would pay if he sells the property. The total zonal value of the property is P5,000,000 and the fair market value per the tax declaration is P2,500,000. He intends to sell it for P6,000,000.

What material considerations will you take into account in computing the income tax? Please explain the legal relevance of each of these considerations. (7%)

8 comments

  1. Mr Belen is not liable for income tax but for capital gains tax computed at 6% of zonal value or actual price, whichever is higher.

    1. Hindi ba mag aaply dito yung tax exemption if you sell your principal residence and the proceeds of which will be used to acquire new residence?

  2. Anon i think the proper answer here would be yung sagot ni sparkle kasi yun ang more responsive answer to the question. Then as a side note you can discuss the exemption given under the code on principal home. honestly hindi ko matandaan ang sgaot ko dito pero may “very vague” memory ako na nadiscuss ko yung market value or actual sale whichever is higher. hehehe

    1. Hehe i think may point ka, naitanong ko lang kasi yung sa principal residence ang naisagot ko but definitely may discussion din ako about FMV (yung dalawa na na define sa code which is either assessors value at zonal valuation ng BIR ata yun) at yung selling price whichever is higher pertaining to unutilized proceeds ng sale.

  3. Actually Anon tama ka, CGT is still a class of income tax, it just so happens na iba ang treatment niya from ordinary income kasi for ever sale of real property CGT is applied kasi ang presumption is that there is always an “imaginary gain”. iba lang siya ng treatment from ordinary income tax, kasi hindi mo na siya kailangan ideclare as part of your income tax.

  4. Sagot ko dito

    Material consideration are the following:

    1. Purchase price of residential house and lot which is 1M;
    2. Zonal value of 5M;
    3. FM value per tax dec which is 2.5M; and
    4. Price intended to sell which is 6M.

    the legal consideration are the following:

    1. Since it is a residential house and lot if it will be sold It may be exempt from CGT if all the requisites under the lgc are complied with.
    2. If a residential house and lot was sold without complying the requisites it will be subject to CGT computed at 6% of the FMV or the Gross Selling prince whichever is higher.

    madami pa akong nilagay di ko lang maalala…

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