BIR Ruling

July 6, 1972 Mr. M. D. Jaurequi F-6 Digna Bldg., Dasmarias Manila S i r : This refers to your letter dated May 30, 1972, requesting legal opinion on the following queries: "A piece of land which is neither leased nor having an income of whatsoever nature and not used by the taxpayer in his business, was sold after being held for more than (12) twelve months. 1. Is the property a Capital Assets? 2. If so, is Capital Gain subject only to 50% tax? 3. Is this under Sec. 132 and 133? In reply, I have the honor to inform you that Section 34(a)(1) of the Tax Code defines the term "capital assets" as: "(1) Capital assets . The term 'capital assets' means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business of the taxpayer." Thus, if a certain property does not fall under any of the exceptions stated in the abovequoted law, that property is a capital asset; and under Section 34(b) of the Tax Code, in case a capital asset has been held by a taxpayer, other than a corporation , for not more than 12 months, 100% of either the gain or the loss shall be considered. However, if the said property has been held for more than 12 months, only 50% of the gain or loss shall be taken into account. Accordingly, a piece of land which is neither leased nor has an income of whatever nature, and not used by a taxpayer in his business is a capital asset, and the gain derived from the sale thereof is a capital gain. And as the said property has been held for more than one year by the vendor, not a corporation, only 50% of the gain derived from its sale has to be considered in computing his net capital gain, pursuant to Section 34(b) of the Tax Code. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue