BIR Ruling [DA-170-00]

March 21, 2000 BIR RULING [DA-170-00] 24 (D) (2); 114-98; DA-170-2000 Mr. Tan Lee Eng 43 Don Vicente Rufino St. Corinthian Gardens Quezon City S i r : This refers to your letter dated February 28, 2000 requesting for exemption from the payment of capital gains tax on the sale of your principal residence together with the improvements thereon situated at 43 Don Vicente Rufino St. Corinthian Gardens, Quezon City pursuant to Section 24 (D)(2) of the Tax Code of 1997. Documents show that aforesaid residential property registered in the name of Tan Lee Eng married to Kho Yu with an area of Seven Hundred Seventy One (771) square meters is covered by Transfer Certificate of Title No. RT-25509 (304640) of the Registry of Deeds for Quezon City; that a certification was issued by the Office of the Tanggapan ng Punong Barangay of Barangay Ugong Norte, Quezon City to the effect that you are a resident of 43 Don Vicente Rufino St. Corinthian Gardens, Quezon City; that you will sell the said property to Albert Tan married to Susan Tan, with address at 436 A. Juan St., San Juan, Metro Manila for and in consideration of the amount of Nineteen Million Two Hundred Seventy Five Thousand Pesos (P19,275,000.00); that the proceeds of said sale will be fully utilized to acquire a new principal residence; and that in support of your request, you submitted to this Office, photocopies of the following documents: 1. Deed of Absolute Sale; 2. Transfer Certificate of Title; 3. Tax Declarations; 4. Barangay Clearance; and 5. Sworn Declaration of Intent. 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 your 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. LexLib 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 Albert Tan, 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 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. 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)