RR No. 20-2020: Amends certain provisions of RR No. 06-2008 (Consolidated Regulations Prescribing the Rules on the Taxation of Sale, Barter, Exchange or Other Disposition of Shares of Stock held as Capital Assets)

Key points

1. Common shares. For shares not listed and traded in local stock exchanges, the book value is the prima facie fair market value. It is based on the latest financial statements certified by an independent public accountant before the sale date, but not earlier than the immediately preceding taxable year.
2. Preferred shares. The liquidation value is the fair market value. It equals the redemption price as of the balance sheet date nearest the transaction date, including any premium and cumulative preferred dividends in arrears.
3. Both classes outstanding. The book value per common share is total equity less the liquidation value of the preferred shares, divided by the outstanding common shares. This uses the balance sheet date nearest the transaction date.
4. No appraisal adjustment. The book value or liquidation value need not be adjusted for appraisal surplus on property not shown in the latest audited financial statements. Those statements are enough to determine fair market value.

Who is affected

• Sellers of unlisted shares of stock held as capital assets