BIR Ruling [DA-180-00]

March 28, 2000 BIR RULING [DA-180-00] S24 (D) (2); 114-98; DA-180-2000 Mr. Dean E. Manuel No. 3 Garnet Street, Emapalico Homes Las Pias City S i r : This refers to your letter dated February 23, 2000 requesting for exemption from the payment of capital gains tax on the sale of your principal residence co-owned with Jesse Jewel E. Manuel situated at No. 29-E CDC (formerly Tacio) Street, corner Abao Street, La Loma, Quezon City pursuant to Section 24 (D) (2) of the Tax Code of 1997. Documents show that aforesaid residential property with an area of 48 sq. m. is covered by TCT No. 117912 issued by the Registry of Deeds of Quezon City; that a certification was issued by the Office of the Barangay Captain of Paang Bundok, Quezon City to the effect, that the property abovementioned is your principal residence; that a Special Power of Attorney was executed by your brother, Jesse Jewel E. Manuel, whereby you were constituted and appointed as his attorney-in-fact to sell, transfer, and convey his pro-indiviso share of the abovementioned property; that you sold the said property to Tessang A. Reyes, Ma. Cecilia A. Reyes, Renato A. Reyes and Bernardita R. Ortega for and in consideration of the amount of Php1,500,000.00; that one-half () of the proceeds of said sale, which pertains to your share of the abovementioned property, will be fully utilized to acquire your new principal residence within eighteen (18) months from the date of the sale; 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; LexLib 3. Tax Declaration; 4. Certification of Barangay Captain; 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. From the foregoing, and since you have manifested your intention to utilize the proceeds pertaining to your one-half () share in the property co-owned with your brother, 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 sale or disposition of the said property, the same shall be exempt from the 6% capital gains tax imposed under Section 24 (D)(1) of the Tax Code of 1997. Your brother, Jesse Jewel E. Manuel, shall be subject to the capital gains tax corresponding to his one-half () share of the proceeds of the property sold. Moreover, the sale or disposition of the said property is subject to the documentary stamp tax imposed under Section 196 of the same Code. (BIR Ruling No. DA-357-98 dated September 3, 1998). Your share in the proceeds of the aforementioned sale, however, shall be subject to the capital gains tax and the corresponding penalties thereto in case you 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. LibLex 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. (BIR Ruling No. 114-98 dated July 27, 1998) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)