BIR Ruling [DA-157-00]

March 21, 2000 BIR RULING [DA-157-00] Sec. 24 (D) (2); DA-125-2000; DA-157-2000 Ms. Danielle Ericka Anne L. Rodriguez #8 Marietta Street, Rosario Pasig City M a d a m : This refers to your letter dated March 6, 2000 requesting for 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. llcd Documents submitted show that you are the registered owner of a parcel of land including improvements thereon situated at Marietta Street, Rosario, Pasig City containing an area of Three Hundred Seventy Six (376) square meters covered by Transfer Certificate of Title No. 636756 issued by the Registry of Deeds of Cainta; that said property is your principal residence as certified by Barangay Rosario Captain Aquilino "Ely" Dela Cruz in a certification issued on March 1, 2000; that on February 7, 2000, you made and executed a Deed of Absolute Sale wherein you sold your above-mentioned principal residence in favor of the Spouses Noron G. Dadayan and Camalodin P. Dadayan for and in consideration of Three Hundred Fifty Thousand Pesos (P350,000.00); that in your Sworn Declaration of Intent, you stated therein that you will use the proceeds of the said sale in acquiring or constructing your new principal residence; and that in your said letter-request dated March 6, 2000, you likewise informed the Commissioner of your intention of using the proceeds of said sale in acquiring/constructing your new principal residence, 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/her 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 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 your new principal residence within the time required by law and have notified the Commissioner of the same within thirty (30) days from the date of sale or disposition of your property, the proceeds from the said sale of your property 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 based on the gross selling price or fair market value/zonal value of the property whichever is higher. (BIR Ruling No. DA-125-2000 dated February 28, 2000) The entire proceeds of the said sale shall be subject to the capital gains tax and the corresponding penalties thereto in case you 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, then 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)