BIR Ruling [DA-074-99]

February 8, 1999 BIR RULING [DA-074-99] Mr. Rolando L. Liwanag No. 903 Satin St., Camella Homes III Sucat, Paraaque City S i r : This refers to your letter dated September 25, 1998 requesting for exemption from the payment of capital gains tax the sale of your principal residence in favor of Ms. Melissa V. Liwanag pursuant to Section 24(D)(2) of the Tax Code of 1997. It is represented that you and your wife, Melita V. Liwanag, are the registered owners of a parcel of land including improvements thereon situated at Lot 3, Block 1-A, Camella Homes III, Paraaque City covered by Transfer Certificate of Title (TCT) No. 13608 issued by the Registry of Deeds of Paraaque Branch; that the said property was certified by Francisco G. Dela Cruz of Barangay San Isidro, Dr. A. Santos Avenue (Sucat Road), Paraaque, Metro Manila and Jose T. Jurado, Barangay Captain, barangay Don Bosco Paraaque, Metro Manila as your principal residence; that the same was sold on October 8, 1998 in favor of Ms. Melissa V. Liwanag for and in consideration of Five Hundred Thousand Pesos (P500,000.00); that you intent to use the proceeds of the sale to finance the acquisition of your new principal residence situated at Block 7, Lot 13, Addas Village II, Molino, Bacoor, Cavite; that on September 22, 1998, you and your wife and the Spouses Domingo Villion and Jocelyn Villion made and executed a Deed of Conditional Sale whereby the Spouses Domingo and Jocelyn Villion, being the registered owner of a parcel of land situated at Block 7, Lot 13, Addas Village II, Molino, Bacoor, Cavite and covered by TCT No. 269538 issued by the Registry of Deeds of Cavite, sold their said real property in your favor for and in consideration of Five Hundred Thousand Pesos (P500,000.00) conditioned on your payment of Fifty Thousand Pesos (P50,000.00) upon the signing of the said Deed and Four Hundred Fifty Thousand (450,000.00) upon release of the proceeds of the sale of the real estate property of the Spouses Rolando and Melita Liwanag covered by TCT No. 13608 but not later than October 31, 1998; and that in support of your request, you submitted to this Office copies of the following documents: 1. Deed of Absolute Sale between the Spouses Rolando and Melita Liwanag and Melissa Liwanag; 2. TCT No. 13608; 3. Corresponding tax declaration; 4. Sworn Statement (Affidavit) as to the utilization of the proceeds of said sale; 5. Certificate of the Brgy. Chairman of San Isidro, Paraaque City that Mr. Rolando Liwanag and his family are residing at Lot 3, Block 1-A, Camella Homes III, Paraaque City; and 6. Deed of Conditional Sale by and between the Spouses Rolando and Melita Liwanag and Spouses Domingo and Jocelyn Villion relative to TCT No. T-269538. In reply, please be informed that pursuant to Section 24(D)(1) and (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 costs 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 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)(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 in favor of Ms. Melissa V. Liwanag is exempt from the 6% capital gains tax imposed under Section 24 (D)(1) of the Tax Code of 1997. (BIR Ruling No. DA-357-98 dated September 3, 1998). dctai 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)