BIR Ruling

April 4, 1973 Mr. Delfin N. Montano Sea Breeze Cavite City S i r : This refers to your letter dated March 31, 1973 requesting information as to the proper application of Revenue Memorandum Circular No. 44-72 to your sale of a house and lot in Tokyo, Japan on May 30, 1972. In determining the gain you derived in pesos, you presented the following formula: "Gross sales in Japanese yens less the sum of the acquisition cost in yens less expenses of sale and/or cost of improvements subsequent to acquisition in yens equal gain in yens converted into U.S. dollars at the rate of exchange at the time of the sale was consummated and then converted into Philippine pesos at the bank's buying rate of exchange at the time of conversion into pesos; and 50% of the gain as converted into pesos shall be the gain to be taken into account." In reply, I have the honor to inform you that your formula is in consonance with Revenue Regulations No. 44-72. Whether or not, however, only 50% of the gain you derived is taxable depends upon whether or not you held the property in the concept of ordinary or capital asset. If the property was used by you only as residence, then it is a capital asset, in which case, only 50% of the gain is taxable, it appearing that you acquired the property in 1968. If the property is used in business, then it is an ordinary asset, in which case, the gain is taxable in full. aisa dc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue