Practice question
An individual shareholder has a qualifying exchange within Section 40(C)(3)(a), receiving permitted stock plus P30,000 cash. Realized gain is P20,000; assume no dividend effect or other special issue. How much gain is recognized under that paragraph?
- P20,000, because recognized gain cannot exceed realized gain and the P30,000 boot ceiling
- P30,000 even though gain is only P20,000
- Zero solely because some stock was received
- The entire stock value regardless of basis
- A P30,000 loss
Legal references
- NIRC, Sections 26, 32(B) and 40(A), (C)(3)-(5), read with later amendments: https://lawphil.net/statutes/repacts/ra1997/ra_8424_1997.html
- RA 11534, Section 10, amended NIRC Section 40(C)(2) and (6): https://lawphil.net/statutes/repacts/ra2021/ra_11534_2021.html
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