BIR Ruling

March 12, 1973 Miss Carmen Ozamiz Jimenez, Misamis Occidental M a d a m : This refers to your letter dated November 28, 1972 giving notice to this Office that you will invest the gain, in the amount of P139,750.00, derived from the sale of your shares of stock of Ozamis Agricultural Development, Inc. for P185,000.00, on November 3, 1972, in any government bonds, securities or debentures mentioned under Section 34(b) of the Tax Code, as amended by Presidential Decree Nos. 16 and 16-A dated October 5, 1972, which provides: "Sec. 34(b) In the case of a taxpayer, other than a corporation, no gain or loss will be recognized on 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 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 became due and payable." (Emphasis supplied) In reply, I have the honor to inform you that pursuant to the above-quoted provision the entire proceeds of the sale and not merely the gain should be so invested. Since only a portion of the proceeds will be invested, only a portion of the gain derived by you will be exempt from income tax. In other words, only such portion of the gain as the amount of P139,730.00, representing your investment, bears to the amount of P185,000.00, representing the proceeds of the sale of your capital assets, shall be exempt from income tax. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue