Dimas owns a parcel of land worth P5,000,000 which he inherited from his father in 2018 when it was worth P3,000,000. His father purchased the property in 2007 for P1,000,000. If Dimas transfers this parcel of land to ABC Corporation, in exchange for shares of stock of said corporation worth P4,500,000. The aggregate basis of Dimas for all his ABC Corporation shares is ______. a. 3,500,000 b. 2,000,000 c. 1,000,000 d. 3,000,000

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A: a.

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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.