BIR Ruling [DA-020-00]

January 11, 2000 BIR RULING [DA-020-00] Mr . Guillermo B . Trinidad 252 St. Francis Street Oranbo, Pasig S i r : This refers to your letter dated October 25, 1999 requesting exemption from the payment of capital gains tax on the sale of your principal residence pursuant to Section 24(D)(2) of the Tax Code of 1997. Documents submitted shows that you are a registered owner of a parcel of land including improvements thereon consisting of a house situated at St. Francis St., Pasig City containing an area of 200 square meters covered by Transfer Certificate of Title No. 99082 issued by the Registry of Deeds for the Province of Rizal; that said parcel of land and house is your principal residence as certified by the Barangay Chairman of Barangay Oranbo, Pasig City in a certification issued on December 7, 1999; that on November 8, 1999, with the marital consent of your wife, Dorotea E. Trinidad, you executed a Deed of Absolute Sale wherein you sold your above-mentioned principal residence in favor of Manuel E. Trinidad in consideration of One Million Six Hundred Nine Thousand Two Hundred Pesos (P1,609,200.00); that an Affidavit dated November 11, 1999, you stated therein that you will use the proceeds of the said sale in acquiring another principal residence within a period of eighteen (18) months reckoned from the date of sale (November 8, 1999); and that in your said letter-request, you likewise informed the Commissioner of your intention to avail of the benefits prescribed under Section 24(D)(2) of the Tax Code of 1997. In reply, please be informed that pursuant to Section 24(D)(2) of the Tax Code of 1997, capital gains presumed to have been realized from the sale or disposition of principal residence by natural person, the proceeds of which is fully utilized in acquiring or constructing a new principal residence within eighteen (18) calendar months from the date of sale or disposition shall be exempt from the capital gains tax imposed under Section 24(D)(1) of the same Code, provided, that the historical cost or adjusted cost basis of the real property sold or disposed shall be carried over to the new principal residence built or acquired; and that the Commissioner shall have been duly notified by the taxpayer within thirty (30) days from the date of sale of disposition through a prescribed return of his intention to avail of the tax exemption thus mentioned, and which can only be availed of once every ten (10) years. The same Section further provides that if there is no full utilization of the proceeds of sale or disposition, the portion of the gain presumed to have been realized from the sale or disposition shall be subject to capital gains tax. For this purpose, the gross selling price or fair market value at the time of sale, whichever is higher, shall be multiplied by a fraction which the unutilized amount bears to the selling price in order to determine the taxable portion for the purpose of computing the tax prescribed under Section 24(D)(1) of the Tax Code of 1997, thereon. From the foregoing, and since you have manifested your intention to fully utilize the proceeds of the sale or disposition of your property to buy and/or construct another new principal residence within the time required by law and have notified the Commissioner of the same within thirty (30) days from the sale or disposition of your property, the proceeds from the sale of your property, is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, but subject to the documentary stamp tax imposed under Section 196 of the same Code. (BIR Ruling No. DA-357-98 dated September 3, 1998). The entire proceeds of the said sale, however, shall be subject to the capital gains tax and the corresponding penalties thereto in case the seller failed to comply with all the conditions set forth under Section 3 of Revenue Regulations No. 13-99 dated July 26, 1999, implementing Section 24(D)(2) of the Tax Code of 1997. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be considered null and void. (BIR Ruling No. 114-98 dated July 27, 1998) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group