BIR Ruling [DA-262-99]

May 4, 1999 BIR RULING [DA-262-99] Mr. & Mrs. Gerry P. Allan 10 Jade St., Severina Diamond Subd. South Super Highway, Paraaque City Sir and Madam : This refers to your letter dated March 16, 1999 requesting exemption from the payment of capital gains tax the sale of your principal residence pursuant to Section 24(D)(2) of the Tax Code of 1997. dctai Documents submitted show that you are the absolute and registered owners of a house and lot situated at #10 Jade St., Severina Diamond Subd., Km. 18 South Super Highway, Paraaque City with an area of 239 square meters covered by Transfer Certificate of Title No. 111508 issued by the Registry of Deeds of Paraaque City; that the said property is your principal residence as confirmed by the Barangay Captain of Brgy. Marcelo Green, Paraaque City, in a Certification dated March 25, 1999; that on March 16, 1999, you sold your said principal residence in favor of Mr. Eduardo L. Labares and Mrs. Diana S. Labares for and in consideration of P1,150,000.00; that you paid the amount of P28,440.00 representing documentary stamp tax due on the said sale of your principal residence; that in an Affidavit you executed on even date, it stated therein that you intend to use the entire proceeds of said sale in acquiring a new house and lot within 18 months after the sale of your above-mentioned property; that you are going to transfer temporarily to your parents home, and that your above request is likewise intended to notify the Commissioner of your intention 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 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 910) 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 but 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 proceed from the sale of your property in favor of Mr. Eduardo L. Labares and Mrs. Dianna S. Labares is exempt from the 6% capital gains tax imposed under Section 24 (D)(1) of the Tax Code of 1997. (BIR Ruling No. DA-357-98 dated September 3, 1998). 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, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue