1. Under option 1.

The property is considered as a capital asset of the corporation since it is not

used in trade or business of the corporation. Since it is a capital asset of the corporation it is
subject to capital gains tax. Under the TRAIN LAW, in the sale of real property considered as
capital asset is subject to 6% capital gains tax based on selling price, fair market value or zonal
value whichever is higher. Assuming the selling price of 16,000,000 is higher than the fair market
value and zonal value, the tax liability should be 960,000. The seller should pay the final
withholding of 960,000 whether or not agreed by the parties.
2. Under option 2. The shares of stock is considered as a capital asset of the corporation since it is
not a dealer in securities. Since it is a capital asset of the corporation it is subject to capital gains
tax. Under the TRAIN LAW, the sale so shares of stock which is a capital asset shall be subject to
15% capital gains tax. The best thing to do here is to purchase all the shares of Ricardo
Villanueva. The tax should be based on 6,000,000 which is the gain realized after deducting the
cost of 9,900,000 to the 16,000,000 consideration. In this case the tax due is 915,000.
3. Option 2
4. I would recommend that in option 1 the agreement should base the purchase price of the real
property on the zonal value so that they would get a lower tax rate but in reality it is still
16million.( not sure kay murag masuko si sir ani)