BIR Ruling

April 5, 1968 Mr. Vincent L. Recto 30 Pili Road Forbes Park Makati, Rizal S i r : This refers to your letter dated March 7, 1968 requesting in effect information as to whether or not the capital gains you derived from the sale of property in November, 1967 is subject to income tax in that year. You manifested that you are the principal stockholder of the Star Management Corporation, a corporation intending to engage in the manufacture of industrial bags for use in rice, sugar, corn, etc. using as raw material polyethene or polypropylene. You further manifested that your corporation had already filed application with the Board of Investments for registration as a pioneer industry. In reply, I have the honor to inform you as follows: Republic Act No. 5186 exempts from the income tax gains realized from the sale, disposition, or transfer of capital assets that corresponds to the portion of the proceeds of the sale that is invested in new issues of capital stock of a registered enterprise within six months from the date the gains were realized. You have, therefore, only up to May, 1968 within which to effect investment in a registered enterprise in order to avail of the exemption. However, while the Board of Industries have already prepared and submitted to the National Economic Council an investment priorities plan pursuant to Section 18 of the law, nevertheless, it is almost a certainty that the plan cannot be approved by the President before May, 1968. It appears further that the Board have not as yet promulgated the necessary regulations. In all likelihood, therefore, you cannot possibly meet the requirement for exemption. For the foregoing consideration, it is the opinion of this Office as it hereby holds that the gains you derived from the disposition of property in November, 1967 is subject to the income tax and should, therefore, be included in your taxable income in said year which you should return for taxation on or before April 15, 1968. It may be stated in this connection that your case had been the subject of discussion with the Board of Investments and the latter shared this view. cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue