8box Solutions Inc.

4_20230710_150500_0001

Contact Number: 09369340340
Email: sales@8box.solutions

REVENUE REGULATIONS NO. 7-2003 issued on February 11, 2003 provides the guidelines in determining whether a particular real property is a capital asset or an ordinary asset for purposes of imposing the Capital Gains Tax or the ordinary Income Tax or the Minimum Corporate Income Tax. With respect to taxpayers engaged in the real estate business, the following real properties shall be classified as ordinary assets: 1) all real properties acquired by the real estate dealer; 2) all real properties acquired by the real estate developer, whether developed or underdeveloped as of the time of acquisition, and all real properties which are held by the real estate developer primarily for sale or for lease to customers in the ordinary course of his trade or business or which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year and all real properties used in the trade or business, whether in the form of land, building, or other improvements; 3) all real properties acquired by the real estate lessor, whether land and/or improvements, which are for lease/rent or being offered for lease/rent, or otherwise for use or being used in the trade or business; and 4) all real properties acquired in the course of trade or business by a taxpayers habitually engaged in the sale of real estate. In the case of a taxpayer not engaged in the real estate business, real properties, whether land, building, or other improvements, which are used or being used or have been previously used in the trade or business of the taxpayer shall be considered as ordinary assets. However, real property used by an exempt corporation in its exempt operations shall not be considered used for business purposes, and therefore, considered as capital asset. Changing of taxpayers’ business from real estate business to non-real estate business shall not result in the re-classification of real property held by it from ordinary asset to capital asset. In the case of subsequent non-operation by taxpayers originally registered to be engaged in the real estate business, all real properties originally acquired by it shall continue to be treated as ordinary assets. Real properties formerly forming part of the stock in trade of a taxpayer engaged in the real estate business, or formerly being used in the trade or business of a taxpayer engaged or not engaged in the real estate business, which were later on abandoned and became idle, shall continue to be treated as ordinary assets. Real property initially acquired by a taxpayer engaged in the real estate business should not result in its conversion into a capital asset even if the same is subsequently abandoned or becomes idle. Provided however, that properties classified as ordinary assets for being used in business by a taxpayer engaged in business other than real estate business are automatically converted into capital assets upon showing of proof that the same have not been used in business for more than two (2) years prior to the consummation of the taxable transactions involving said properties. Real properties classified as capital or ordinary asset in the hands of the seller/transferor may change their character in the hands of the buyer/transferee. The classification of such properties shall be determined in accordance with the rules specified in the Regulations. In the case of involuntary transfer of real properties, including expropriation or foreclosure sale, the involuntariness of such sale shall have no effect on the classification of such real property in the hands of the involuntary seller. Gains/income derived from sale, exchange, or other disposition of real properties shall, unless otherwise exempt, be subject to applicable taxes (as specified in the Regulations), depending on whether the subject properties are classified as capital assets or ordinary assets.