BIR Ruling [DA-043-02]

March 11, 2002 BIR RULING [DA-043-02] Law Firm of Sta. Romana & Sta. Romana 79 Maysilo Corner San Francisco Sts. Mandaluyong City 1550 Attention: Atty. Antonio B. Sta. Romana Gentlemen : This refers to your letter dated February 13, 2002 requesting for the confirmation of your opinion that the sale of a parcel of land with improvements thereon by your client, Flying Medical Samaritans, Inc. (FMSI) , to the Grace Family Fellowship, Inc . is exempt from the payment of capital gains tax or any other kind of income tax from its proceeds. It is represented that the Flying Medical Samaritans, Inc. is a non-stock, non-profit, charitable and religious corporation duly registered with the Securities and Exchange Commission on July 4, 2000; that the corporation is formed for the following purposes: "1. To provide free medical services, evacuation, specifically by aircraft and seacraft within the means available, and to fly humanitarian missions including, but not limited to medical evacuations, deliveries and air drops of medical supplies, food and clothing and transportation of medical personnel; "2. To provide means of relief or needed assistance for indigents, low-income and victims of sickness, disease, famine, flood, fire and other disasters or causes of human suffering, in order to prepare them to adapt to normal life, and especially to provide rehabilitation programs for those rescued from alcohol and drug addiction; "3. To establish and maintain child care program, where children (abandoned, orphaned or in any way disadvantaged) are given care, food shelter and clothing, including instructions in health, physical fitness, spiritual upliftment and formal and informal education; to provide a place where children are given the opportunity to improve and develop their natural gifts to the fullest extent, such as, but not limited to day care centers, home for the street/orphaned children, abandoned or otherwise disadvantaged children; "4. To undertake, carry out, implement and effectuate community development projects, plans, programs, and policies geared towards the totality of man's development, to provide assistance to all sectors of the community particularly those from the economically depressed and socially underprivileged groups; "xxx xxx xxx" "8. To undertake religious works by teaching the Holy Gospel of Jesus Christ concomitant to the mandate in verse 19, chapter 28 of the Gospel according to St. Matthew, the apostle; to minister the spiritual needs and well-being of believers; and to establish Christian churches which shall be called Pacific Mission Fellowship, as well as to maintain and administer existing Christian churches ceded to it by C G S C. In this regard Flying Medical Samaritans, Inc. shall be a ministry of Pacific Missionary Aviation. "xxx xxx xxx" "10. To own, lease, operate and maintain aircraft of all kinds, aircraft repair facilities and aircraft parts, hangars, runways and other real and personal property necessary or incidental to the operation or maintenance of aircraft; "11. To assist in the upliftment of the socio-economic conditions of the people by boosting the tourism potentials of the areas where FMS ministers through the opening of air trips, providing means of air transportation to tourists, engaging in cleanliness and beautification campaigns, skills-training in indigenous crafts, promoting tourist spots, and developing the cultural heritage of the different communities." that FMSI is the registered owner of a parcel of land with improvements located in Zamboanga City covered by Transfer Certificate of Title Nos. T-71,074 and T-71,075 issued by the Registry of Deeds of Zamboanga City containing a total area of Five Hundred Eighty Six (586) square meters; and that the proceeds of the sale of the subject parcel of land shall be actually, directly and exclusively used for religious and charitable activities, i.e., the acquisition of real property, construction of new churches and charitable projects in the Luzon and Visayas areas. In reply, please be informed that the income to be derived from the sale of the subject real property is not within the contemplation of the last paragraph of Section 30 of the Tax Code of 1997, and will not result from the productive use of real properties but from a single transaction which is merely incidental to the religious purposes, hence, exempt from the capital gains tax. (BIR Ruling No. DA-101-98 dated March 20, 1998) The aforesaid opinion has been sustained and adopted by the Court of Tax Appeals in CTA Case No. 1468 dated October 14, 1968 ( Congregacion de la Mission de San Vicente de Paul ). Accordingly, the profit or income resulting from the sale transaction would be merely incidental to the religious purposes for which your corporation was created. And as anew site will not be required for speculation or as an investment to be eventually sold primarily for monetary gain, there is reason enough to say that income to be derived from the sale of said property is not within the contemplation of the proviso of Section 30 and will therefore, not render such profit taxable as income (BIR Ruling No. 115-92 dated April 2, 1992 and Opinion of Secretary of Justice, GC No. V-287 dated April 7, 1959). However, the Deed of Absolute Sale executed for the purpose is subject to documentary stamp tax pursuant to Section 106 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 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.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service