BIR Ruling [DA-091-06]

March 6, 2006 BIR RULING [DA-091-06] 27 (D) (5); 196; DA-042-2004 Mr. Julian P. Delector Blk. 142, Lot 5 Zone 2 AFP Housing, Bulihan Silang, Cavite S i r : This refers to your letter dated December 7, 2005 requesting for a ruling that the sale by Mr. Nicasio Alcantara of his right over one (1) parcel of land located at Bulihan, Silang, Cavite, covered by TCT No. T-744816 with an area of seventy (70) sq.m. more or less, to Mesdames Ignacia Berthome and Valere Berthome be exempt from capital gains tax and documentary stamp tax. In reply, please be informed that under Section 27(D)(5) of the Tax Code of 1997, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of the Tax Code of 1997, whichever is higher, is imposed upon capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital asset including pacto de retro sales and other forms of conditional sales by individuals, including estates and trust. In the instant case, however, the sale by Mr. Nicasio Alcantara of his right over one (1) parcel of land to Mesdames Ignacia Berthome and Valere Berthome was not a sale, exchange or disposition of real property classified as capital asset located in the Philippines, but rather an assignment of right pertaining to such property, hence, not included within the provision of Section 27(D)(5) of the Tax Code of 1997 This is so, considering that in sale of right, the buyer merely steps into the shoes of the seller without acquiring a better right than what the seller had in the property to which the sold right pertains. It is, however, understood, that any gain realized by the seller from and as a consequence of such sale, is subject to income tax. Accordingly, the sale of rights over one (1) parcel of land is not subject to capital gains tax imposed under Section 27(D)(5) of the Tax Code of 1997, nor to the documentary stamp tax prescribed under Section 196 of the same Code. The notarial acknowledgement of the Deed however, is subject to P15.00 documentary stamp tax pursuant to Section 88 of the Tax Code of 1997. ASTcaE This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service