BIR Ruling [DA-038-00]

January 19, 2000 BIR RULING [DA-038-00] Ms . Divinia B . Sahagun 40 Josefa Avenue North Susana Executive Village Diliman, Quezon City M a d a m : This refers to your letter dated December 13, 1999 requesting for exemption from the payment of capital gains tax on the sale of your principal residence situated at No. 40, Josefa Avenue, North Susana Executive Village, Diliman, Quezon City covered by Transfer Certificate of Title No. 51855 in favor of Marking C. Que pursuant to Section 24(D)(2) of the Tax Code of 1997. It is represented that you are the registered owner of a parcel of land including improvements thereon situated at No. 40 Josefa Avenue, North Susana Executive Village, Diliman, Quezon City; that the said property is your principal residence; that you have executed a Deed Of Absolute Sale on January 3, 2000 in favor of Marking C. Que with postal address at # 28 Saint Joseph St., Villa Espaa, Subdivision, Araneta Avenue, Quezon City for and in consideration of P2,500,000.00; that it is your intention to use the proceeds of the said sale to finance your acquisition of your intended new principal residence; and that in support of your request, you submitted to this Office copies of the following documents: 1. Deed of Absolute Sale; 2. Transfer Certificate of Title No. 51855; 3. Corresponding tax declaration; 4. Sworn Declaration of Intent as to the utilization of the proceeds of said sale; 5. Certification of the Barangay Captain of the place where your sold property is located to the effect that the same is your principal residence prior to the sale thereof; and 6. Other pertinent documents 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 their principal residence by natural persons, 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 or disposition through a prescribed return of her intention to avail of the tax exemption thus mentioned, and in 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)(2) 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 another parcel of land including improvements thereon as your new principal residence within eighteen (18) calendar months reckoned from January 3, 2000 as 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 in favor of the Marking C. Que is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. The entire proceeds of the sale 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. (BIR Ruling No. 114-98 dated July 27, 1998) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group