BIR Ruling [DA-094-99]

February 15, 1999 BIR RULING [DA-094-99] Ms. Hilaria S. Delos Reyes 559 Pipin St., Sampaloc Manila M a d a m : This refers to your letter dated October 23, 1998 requesting for a ruling as to the applicable tax base relative to the sale by the co-owners Ramunda R. Villamin, Salvador Villamin, Jr., Elenita Jobo, Rodolfo Villamin, Wilfredo Villamin, Roberto Villamin, and Reynaldo Villamin of their real properties in favor of the Republic of the Philippines thru the Department of Public Works and Highways (DPWH) due to the construction and widening of Quirino Highway, Novaliches, Quezon City. prcd Documents submitted show that portions of Lots 1 and 2, PSJ-13199 containing a total area of 37.00 square meters located in Barangay Gulod, San Bartolome District, Novaliches, Quezon City is registered in the name of the above co-owners under Transfer Certificate of Title No. RT-63615 (261340) issued by the Registry of Deeds of Quezon City; that due to the road widening project sometime in 1980 and 1981 of the Quirino Highway by the DPWH, the above portions of lots, 17 square meters of Lot 1 and 20 square meters of Lot 2, of the said real properties covered under TCT No. RT-63615 (261340) were affected by the said protect; that to formalize the transfer, a Deed of Absolute Sale was executed on December 12, 1993 by and between the said co-owners and the Republic of the Philippines thru the DPWH whereby the former sold in favor of the latter the above-mentioned portions of Lots 1 and 2 for and in consideration of P12,210.00; that the corresponding capital gains tax and documentary stamp tax were not paid due to the issue of the tax base to be used in the computation thereof. In reply, please be informed that under Revenue Memorandum Circular (RMC) No. 21-93, the tax base of capital gains tax on sales of property in favor of the government for road right-of-way purposes shall be the consideration appearing on the Deed of Sale, even though the said consideration is lower than the zonal valuation of the property sold considering that the likelihood of undervaluation of the purchase price in this case is remote as the government is the buyer of said realty. Accordingly, in computing the capital gains tax due including the documentary stamp tax (RMC No. 41-91) on the sale by the aforesaid co-owners of a portion of their real properties covered by TCT No. RT-63615 (261340) in favor of the Republic of the Philippines thru the DPWH, the tax base to be used shall be the consideration appearing on the Deed of Sale executed by the parties on December 12, 1993 which is P12,210.00 as an exception to the policy of this Office in relation to Section 6(E) and Section 21(c) of the Tax Code, as amended [now Section 6(E) (and Section 24(D)(1) of the Tax Code of 1997]. (BIR Ruling No. 022-91 dated February 14, 1991) cdti Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)