Ms. Lourdes Estudillo Paez-Villa

May 10, 2007 BIR RULING [DA-290-07] Section 24 (D) (1); BIR Ruling No. 144-96 dtd 12/24/96 Ms. Lourdes Estudillo Paez-Villa 905 Padre Faura St., Ermita Manila M a d a m : This refers to your undated letter received by this Office on March 6, 2007, requesting exemption from the payment of capital gains tax on your sale of your lot to the Department of Public Works and Highways (DPWH), for the construction of the Marikina-Infanta Road, now known as Marcos Highway. It is represented that you have a house and lot in Antipolo, Rizal; that the said parcel of land was planted with coffee, mango, vegetables and others; that during the Marcos Regime, your property was "invaded" by DPWH because you were out of the country; that when you came back, you took a legal action against DPWH and was successful; that to make it formal, you sold your property to the Government through DPWH which paid you partially the amount of P11,169,000.00 sometime in 2003; and that before DPWH will pay you the balance of P650,000.00, you were required to present a BIR Certificate of Tax Exemption. Hence, your request. DEcTIS In reply, we regret to inform you that we cannot grant your request for lack of legal basis. Section 24 (D) (1) of the Tax Code of 1997, as amended, is explicit in its provisions that capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital asset, including pacto de retro sales by individuals, including estates and trusts, shall be taxed at the rate of 6% based on the gross selling price or the fair market value prevailing at the time of sale, whichever is higher. Accordingly, the expropriation sale of your property to DPWH is subject to the 6% capital gains tax regardless of whether any gain or profit was derived therefrom since the aforesaid law is comprehensive enough to cover not only voluntary sale but likewise involuntary sale as in the instant case. (BIR Ruling No. 091-89 dated May 2, 1989). However, both capital gains tax and documentary stamp tax shall be computed based on the actual consideration appearing in the Deed of Sale pursuant to Revenue Memorandum Order No. 41-91. Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner