BIR Ruling

March 1, 1973 Mr. Lorenzo M. Clemento 741 Misericordia Street Naga City S i r : This refers to your letter dated October 26, 1972 which poses the following query: "This is to give notice that last October 18, I sold my lot to the owner of the Mercury Drug, Manila, for P110,000.00. I acquired this property several years age and at the time of the sale it was mortgaged with the PNB, Naga Branch, for P18,000.00 plus the accrued interest. cdt "In view of the presidential proclamation regarding the condonement of the capital gains tax, may I inquire if I am required to invest the entire amount in any productive enterprise or just the taxable portion thereof." In reply thereto, I have the honor to inform you as follows: Section 34(b) of the Tax Code, as amended by Presidential Decree Nos. 16 and 16-A provides: "Section 34(b) In the case of a taxpayer, other than a corporation, no gain or loss will be recognized to the portion of the gains realized that corresponds to the portion of the proceeds of the sale, disposition or transfer of capital assets , except shares of stocks of corporation covered in Section 4 of Republic Act No. 6141, invested in the 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: Provided , That the shares of stocks or government instruments representing the investments are not disposed of, transferred, assigned or conveyed for a period of three (3) years from the date the investment was made, otherwise all the taxes due on the gains realized from the original transfer, sale or disposition of the capital assets shall immediately become due and payable. (As amended by Pres. Decrees Nos. 16 and 16-A, October 5, 1972)." (Emphasis supplied) Under the aforequoted provision, the entire net proceeds of the transaction, and not only the gains thereof, should be invested in order that the gains derived may be exempt from the capital gains tax. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue