BIR Ruling

October 15, 1973 CCP Securities Corporation Makati Stock Exchange Building Ayala Avenue, Makati, Rizal Gentlemen : This refers to your letter dated October 11, 1973 requesting information on certain points regarding a proposed transaction involving the availment of the capital gains tax exemption under Presidential Decree Nos. 16 and 16-A under the following facts: acd "On September 26, 1973 our client sold real estate on which he received gross proceeds of P500,000. Of this amount, he realized capital gains of P325,844, the real estate having been acquired in 1957 at a cost of P174,156. "On October 5, 1973, said client, desiring to avail of the capital gains tax exemption under Presidential Decree No. 16 and 16-A, invested the entire proceeds of the sale of P500,000 in original issues of Central Bank Certificates of Indebtedness (CBCI), Series C, which he purchased from our office and which constituted part of our CBCI Inventory as an authorized dealer of the Central Bank. This particular series C matures on February 16, 1976 so even if he holds on to this investment up to maturity date he will fall short of the required minimum three-year holding period by approximately eight months under the aforesaid Presidential Decrees. To obviate the problem later of having to look for qualified securities in which to reinvest the proceeds of the CBCI at maturity on February 16, 1976 to complete the three year holding period of up to October 5, 1976, we are proposing that he substitute this series C which he presently holds with a new Series of CBCI's which the Central Bank will be issuing on October 16, 1973. Since this new series will be maturing on October 16, 1976, the substitution of his present CBCI holding with an equivalent amount of this new series will enable him to comply with the three-year holding period in full." In reply, I have the honor to inform you that the foregoing transaction will not violate the prohibition against any transfer, assignment or conveyance of securities as provided under Presidential Decree Nos. 16 and 16-A. After the substitution of securities is effected, your client will continue to enjoy the exemption from capital gains tax as provided in the Decree since the result is a continuity of investment in a qualified area of investment. However, in case your client had already filed a Notice of Investment (BIR Form No. 1762 A) with this Office covering his first investment of CBCI Series C, pursuant to Section 5 of Revenue Regulations No. 7-72, he should file another Notice of Investment covering the new series of CBCI's within thirty (30) days from substitution of securities for purposes of record. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."