BIR Ruling [DA-158-00]

March 21, 2000 BIR RULING [DA-158-00] 24 (D) (2); DA-519-99; DA-158-2000 Mr. Antonio T. Barrinuevo 14 Beach St., Summerville Subdivision Mayamot, Antipolo City S i r : This refers to your letter dated December 16, 1999 requesting in effect for a ruling exempting the sale of your principal residence from the payment of capital gains tax pursuant to Section 24(D)(2) of the Tax Code of 1997. Documents submitted disclosed that Spouses Antonio and Naty Barrinuevo are the registered owners of a parcel of land together with the improvements thereon located at 14 Beach St., Summerville Subdivision, Mayamot, Antipolo City; that said property is covered Transfer Certificate of Title No. 167083 issued by the Registry of Deeds for Marikina, Metro Manila; that you are a resident of the said Barangay as certified to by Punong Barangay Prudencio M. Aquino; that on November 22, 1999, you executed a Deed of Absolute Sale in favor of Ms. Nonita C. Sandigan for and in consideration of Six Hundred Thirty Seven Thousand Seven Hundred Twenty Pesos (P637,720.00); that the proceeds from the aforementioned sale will be utilized in the acquisition and construction of a new principal residence; that in the same letter, you have likewise notified the Commissioner within thirty (30) days from the date of sale or disposition of your intention to avail of the tax of the tax exemption prescribed under Section 24(D)(2) of the Tax Code of 1997; and that in support of your request, you submitted to this office the following documents: 1) Deed of Absolute Sale; 2) Transfer Certificate of Title; 3) Tax Declarations; 4) Affidavit of Undertaking; and 5) Certification from the Punong Barangay where the property sold is situated stating therein that you are a resident of the said Barangay. In reply, please be informed that pursuant to Section 24(D)(2) of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, 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 intention to avail of the tax exemption thus mentioned, and 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 finance the acquisition and construction of a new principal residence within eighteen (18) calendar months reckoned from November 22, 1999 as 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 Ms. Nonita C. Sandigan is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. However, the same is subject to the documentary stamp tax imposed under Section 196 of Tax Code of 1997 based on the gross selling price or fair market value/zonal value of the property whichever is higher. The entire proceeds of the said sale, however, 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. As regards your claim for refund involving the amount of P38,263.20 representing erroneous payment of capital gains tax, you are requested to lodge the same with the Appellate Division, this Bureau. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be considered null and void. llcd Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)