Jasmin Company purchased an investment property on January 1, 2017 at a cost of P2,200,000. The property has a useful life of 40 years and at December 31, 2019 had a fair value of P3,000,000. On January 1, 2020, the property was sold for net proceeds of P2,900,000. The fair value of the investment property cannot be measured reliably. What is the gain or loss to be recognized in profit or loss for the year ended December 31, 2020 regarding the disposal of the property?

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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.