BIR Ruling [DA-104-00]

February 15, 2000 BIR RULING [DA-104-00] Mr . Felino A . Palafox, Jr . 620 Taysan St., Ayala Alabang Village Muntinlupa City S i r : This refers to your letter dated January 20, 2000 requesting for exemption from the payment of capital gains tax on the sale of your principal residence situated at No. 620 Taysan St., Ayala Alabang Village, Muntinlupa City pursuant to Section 24(D)(2) of the Tax Code of 1997. llcd Documents show that aforesaid residential property with an area of Four Hundred Seventy Seven (477) square meters is covered by Transfer Certificate of Title No. 133865 of the Registry of Deeds for Makati, Metro Manila; that a certification was issued by the Office of the Barangay Chairman of Barangay Ayala Alabang, Muntinlupa City to the effect that you are a resident of No. 620 Taysan St., Ayala Alabang Village, Muntinlupa City; that you will sell the said property to Joseph Christian G. del Rosario, for and in consideration of the amount of Eleven Million Three Hundred Thousand Pesos (P11,300,000.00); that the proceeds of said sale will be fully utilized to acquire a new principal residence located at Rizal Tower, Rockwell Center, Amapola Street, Makati City; and that in support of your request, you submitted to this Office, photocopies of the following documents: 1) Contract to Sell; 2) Transfer Certificate of Title; 3) Tax Declaration; 4) Certification of Barangay Chairman; and 5) Affidavit of Undertaking. 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 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 Joseph Christian G. del Rosario, is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 but subject to the documentary stamp tax imposed under Section 196 of the same Code. The entire proceeds of the sale shall be subject to the capital gains tax and the corresponding penalties thereto in case the seller failed to comply with all the conditions set forth under Section 3 of 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)