BIR Ruling

April 10, 1973 The Regional Director South Manila Redo Bldg., Remedios Manila S i r : This refers to your letter dated April 6, 1973 requesting information as to whether or not Presidential Decree No. 16, under the circumstances presented as follows: cd "Date of sale of Land August 2, 1972 Down payment August 2, 1972 P194,090.40 1st Installment January 5, 1973 P194,090.40 2nd Installment February 28, 1973 P194,090.40 3rd Installment May 31, 1973 P194,090.40 4th Installment August 31, 1973 P194,090.40 P970,452.00 Cost P19,000.00 Given to kasama tenant 90,000.00 Agent's commission 48,000.00 Attorney's fee 6,600.00 Total P163,600.00." In reply, you are informed as follows: The sale presented above is clearly a sale of real property on the installment plan, the initial payment being less than 25% of the selling price. Such being the case, the gain from the sale shall be considered realized upon receipt of each installment payment and the amount thereof is that proportion of the installment payment which the gross profit realized or to be realized when payment is completed bears to the total contract price. (See Section 43(b) of the Tax Code). Presidential Decree No. 16, as amended by Presidential Decree No. 16-A exempts from tax that portion of the gain realized that corresponds to the portion of the proceeds of the sale, disposition or transfer of capital assets, except shares of stocks of corporations covered by Section 4 of Republic Act No. 6141, invested in capital stocks of preferred productive enterprises or in the purchase of new issues of government bonds, securities, debentures and notes other than treasury bills within six (6) months from the date the gains were realized. Since, pursuant to Section 43(b) of the Tax Code, the gains in case of installment sales are deemed realized upon receipt of each installment payment, it is the opinion of this Office as it hereby holds, that the portion of the gain corresponding to that portion of each installment payment which are invested as provided for by the Decree shall be exempt from tax notwithstanding the fact that the sale of the capital asset was made on August 2, 1972 or two months before the promulgation of Presidential Decree No. 16, as amended. It is of course understood that the taxpayer shall comply with the requirements of the Decree and Revenue Regulations No. 7-72, as amended by Revenue Regulations No. 7A-72. aisa dc Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue