WHAT IS MEANT BY CAPITAL ASSET?

Capital asset means property held by the taxpayer (whether or not connected with his trade or business), but does not include –

a) stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year; or

b) property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; or

c) property used in the trade or business of a character which is subject to the allowance for depreciation provided in subsection (F) of Sec. 34 of the Code; or

d) real property used in trade or business of the taxpayer.

(Excerpts from Source : http://www.bir.gov.ph/taxinfo/tax_capgin.htm)