BIR Ruling

December 19, 1972 Mr. Antonio G. Sabater 27 Mapagmahal Street Pinahan, Diliman Quezon City S i r : This refers to your letter wherein you posed the following queries: 1. Whether the excess of the price received by you from the sale of your duplex residential house is a capital gain or an ordinary gain; 2. Whether or not the subsistence and living allowances received by you from the Rice and Corn Administration, as reimbursement of your actual expenses incurred while serving therein as Comptroller and Finance Director, are taxable; 3. Whether or not the subsistence and laundry allowances received by your wife, as Supervising Nurse in the National Children's Hospital, are taxable. In reply to the above queries, I have the honor to inform you as follows: (1) As defined in Section 34(a) of the Tax Code, the term "capital assets" includes all the properties of the taxpayer whether or not connected with his trade or business, except: (a) stock in trade or other property included in the inventory; (b) property primarily for sale to customers in the ordinary course of his trade or business; (c) property used in trade or business and subject to depreciation; and (d) real property used in trade or business. If the taxpayer sells any of the above-enumerated properties the gain or loss therefrom is either an ordinary gain or an ordinary loss. The gain or loss from the sale of all other properties is either a capital gain or a capital loss. You represented that during the period from 1955 to 1965, the upper floor of your house was occupied by you as a residence; that in 1965, the down portion of the same was rented for 6 months and had an income of P600.00 carried in your income tax return for that year; that in 1966, the year of sale the down portion of the house was not rented. cdta It may be concluded from the foregoing facts that your duplex house, although it had been let for sometime, is a capital asset, since the same had been used by you primarily as a residence. Such being the case, the profit realized from the sale thereof is a capital gain taxable to the extent of 50%, pursuant to Section 34(b)(2) of the Tax Code (Pedro Bautista, vs. Collector of Internal Revenue, G.R. No. L-12250, May 27, 1959) (2) The total amount paid to you by RCA in 1966 as reimbursement for your transportation expenses, including the entire amount expended for meals and lodging are returnable for income tax purposes in the taxable year received. As to the question of whether or not the subsistence and laundry allowances received by your wife a Supervising Nurse in the National Children's Hospital, are taxable, this Office believes and so holds that the same are not taxable under the so-called "Convenience of the Employer" rule. By virtue of this principle an employee is not taxed on the value of meals and lodgings furnished him by his employer if all these tests are met: (1) the meals or lodging is furnished for the "convenience of the employer". (2) the meals or lodging is furnished on the employer's business premises; (3) in the case of lodging (this test need not be met for meals), the employee is required to accept the lodging as a condition of his employment. (33 Am. Jur. 2d, Sec. 3281, p. 823). acd Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue