BIR Ruling [DA-268-04]

May 17, 2004 BIR RULING [DA-268-04] #538-88 Philippine State College of Aeronautics Villamor Airbase, Pasay City Attention: Dr. Henrietta B. Sumalbag President M a d a m : This refers to your letter dated January 13, 2003, requesting for exemption from capital gains arising from your purchase of a parcel of land from the Bases Conversion and Development Authority. It is represented that the Philippine State College of Aeronautics was created under Republic Act No. 7605. The college has no land of its own so that in calendar year 2000, you purchased from the Bases Conversion and Development Authority the land you had been occupying in Villamor Airbase. It is further represented that after the perfection of the sale, you were required to pay the capital gains tax due on the transaction but was unable to pay the same due to financial constraints. In view, thereof, you are asking for exemption from the capital gains tax due on the transaction. In reply, please be informed that in BIR Ruling No. 538-88, November 14, 1988, this Office ruled that the liability to pay the capital gains tax arising from the sale of real property lies with the seller, to wit: ". . . In the case of sale of real property, it is the seller thereof who is liable for the payment of income tax or of the capital gains tax since he is the one presumed to have realized capital gains from the sale of the real property classified as capital assets. Likewise, it is also the seller thereof who is liable for the payment of the documentary stamp tax pursuant to Section 173 of the Tax Code, as amended. In other words, as purchaser of the aforementioned properties, you are not liable to the payment of the capital gains tax under Section (24(e) of the Tax Code, as amended. . . " Accordingly, you are not liable for the unpaid capital gains tax arising from your purchase of a parcel of land from the Bases Conversion and Development Authority. 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group