BIR Ruling [DA-114-99]

February 25, 1999 BIR RULING [DA-114-99] Mr. Nestor P. Arboly #20 Mabolo Street, Valle Verde I, Pasig City S i r : This refers to your letter dated December 3, 1998 requesting exemption from the payment of Capital Gains Tax on the sale of your principal residence pursuant to Section 24 (D)(2) of the Tax Code of 1997. It is represented that you are the registered and absolute owner of a parcel of land including improvement existing thereon situated at Barangay Ugong; Pasig City covered by Transfer Certificate of Title No. PT-66857 issued by the Register of Deeds of Pasig City; that said realty is your principal residence, which fact was certified by the Barangay Chairman of Barangay Ugong, Pasig City in a Certification dated December 2, 1998; that on even date, you and your wife sold your said principal residence in favor of AOI Ventures Corporation for and in consideration of Nine Million Pesos (P9,000,000.00); that in a letter dated December 3, 1998 and notarized on December 9, 1998, you served notice of your intention to avail of the exemption provision of Section 24 (D)(2) of the Tax Code of 1997 by using the proceeds of the above sale of your principal residence within 18 months from the said sale to acquire a new principal residence; and that in support of your request, you submitted to this Office copies of the following documents: 1. Letter dated December 3, 1998 giving notice of intention to avail of the provision of Section 24 (D)(2) of the Tax Code of 1997; 2. Affidavit relative to the sale of the principal residence and the use to which you intend to devote the proceeds of said sale; 3. Deed of Absolute Sale; 4. Certification issued by the Barangay Chairman of Barangay Ugong that you are a bonafide resident of said Barangay; 5. Transfer Certificate of Title No. PT-66857; 6. Corresponding Tax Declaration. 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 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 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 the 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 time of sale, whichever is higher, shall be multiplied by the 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)(2) of the Tax Code of 1997. 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/acquire another lot and house as your 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 AOI Ventures Corporation is exempt from the 6% capital gains tax imposed under Section 24(D)(1) 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. LLphil Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)