@mj0707 wrote:
Thanks for the explanation and the links.
1. The property was a house that I have been paying for monthly since 2006 until early this year. So all of those expenses plus downpayment must be considered as total cost of property, is that right? In which case, I sold the property at a loss because it has been unattended and was just additional expense for me.
No. The cost is whatever the selling price/purchase price was. I don't know if home ownership is different in the Philippines. In the US, suppose you buy a house for $100,000. You put down 20% ($20,000) and you pay a mortgage of maybe $430 per month for 30 years, which includes principle and interest. That is money you borrowed, and promised to pay back. The purchase price of the house is not $20,000 plus $430 per month,, the purchase price is $100,000. Interest you pay to borrow the money is not counted as part of the cost for the house, only what it would have cost if you had paid cash.
Then suppose you sell for $120,000, but you only receive $40,000 because you have to pay off the mortgage. The selling price minus the purchase price is $20,000, that's your capital gain. It has almost nothing to do with the actual cash proceeds.
Or suppose you bought for $100,000 with $20,000 downpayment. You borrow another $30,000 as a home equity loan. You sell the house for $120,000. You still have a capital gain of $20,000 that you must pay tax on, even though you got no cash at the closing and still owe more to the bank. (Remember you did get the extra $30,000 tax-free at the time because of the promise to pay it back. Your gain is still $20,000.
If you bought for a downpayment and a fixed price per month, there should have been an overall contract price, or a price can be calculated based on the payment and the number of months you were supposed to pay.
