BIR Ruling [DA-079-00]

February 2, 2000 BIR RULING [DA-079-00] Mr . Lazaro A . Comsti No. 15 Dr. Pilapil Street Kapasigan, Pasig City S i r : This refers to your letter dated December 8, 1999 requesting exemption from the payment of capital gains tax the sale of your principal residence pursuant to Section 24 (D)(2) of the Tax Code 1997. Documents submitted show that you and your wife, Aurora Valero-Comsti, are the registered owners of a parcel of land including improvements thereon situated at #15 Dr. Pilapil St., Barangay Kapasigan, Pasig City containing an area of Two Hundred Sixty (260) square meters covered by Transfer Certificate of Title No. 64438 issued by the Registry of Deeds of Pasig City; that said property is your principal residence as certified by the Barangay Kapasigan Captain Alfonso R. Reyes in a certification issued on December 7, 1999; that on December 15, 1999, you, with the marital consent of your wife, together with Marissa V. Comsti and Patrick Comsti Tanyag, made and executed a Deed of Absolute Sale wherein you sold your above-mentioned principal residence in favor of Marissa V. Comsti and Patrick Comsti Tanyag for and in consideration of Two Hundred Thousand Pesos (P200,000.00); that in an affidavit dated December 7, 1999, you stated therein that you will use the proceed of the said sale in buying and/or building your new principal residence; and that in your said letter-request dated December 8, 1999, you likewise informed the Commissioner of your intention of using the proceed of said sale in buying and/or building your new principal residence, thereby indirectly saying that you would like to avail of the benefits 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 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 in which can only be availed of once every ten (10) years. LibLex The same Section further provides that if there is no full utilization of the proceeds of the 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 Marissa V. Comsti and Patrick Comsti Tayag is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. However, the same is subject to the documentary stamp tax imposed under Section 196 based on the gross selling price or fair market value/zonal value of the property whichever is higher. (BIR Ruling No. DA-357-98 dated September 3, 1998). However, this exemption shall be rendered null and void and the entire proceeds of the said sale shall be subject to the capital gains tax and the corresponding penalties thereto in case the seller failed to comply with the sworn declaration and post reporting requirements and all other conditions set forth under 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 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)