BIR Ruling [DA-043-00]

January 20, 2000 BIR RULING [DA-043-00] Ms . Ofelia G . Reyes 84-A Bonifacio St., Barangay Sta. Lucia San Juan, Metro Manila M a d a m : This refers to your letter dated January 18, 2000 requesting confirmation of your opinion that the sale of your new principal residence is exempt from capital gains tax pursuant to Section 24(D)(2) of the Tax Code of 1997 It is represented that you are the registered owners of a condominium located and dominated as apartment Unit-A, A. Bonifacio St., Barangay Sta. Lucia San Juan, Metro Manila, covered by Condominium Certificate of Title No. 685-R of the National Land Titles and Deeds Registration Administration (Land Registration Authority) for San Juan, Metro Manila; that said property is my principal residence as certified to by Barangay Kagawad Pablo R. San Gregorio; that on January 18, 2000, a Deeds of Absolute Sale was executed by the Spouses Ofelia G. Reyes and Celso L. Reyes in favor of Spouses Chona Benedicta A. Mendoza and Carlos V. Mendoza; that the proceeds from the said sale will be used in acquiring / constructing a new principal residence and that in support of your request, you submitted to this Office the following documents: 1. Deed of Absolute Sale; 2. Transfer Certificate of Title; 3. Tax Declarations; 4. Sworn Declarations of Undertaking; and 5. Certificate of Barangay Captain where the property sold is located, to the fact that you and the members of your family are residents of the Place and known in the community. In reply, please be informed that pursuant to Section 24(D)(2) of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, 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 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)(2) of the Tax Code of 1997. From the foregoing, and since you have manifested your intention to fully utilized 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 in favor of Spouses Mendoza is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, but subject to 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. cdlex 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, then 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