BIR Ruling [DA-300-99]

May 18, 1999 BIR RULING [DA-300-99] Ms. Mercedita A. Jacinto J.P. Rizal Street Barangay Bayanbayanan Quezon City M a d a m : This refers to your letter dated May 8, 1998 requesting in effect for exemption from the payment of capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. It is represented that you are registered and absolute owner of a parcel of land together with the building and improvements thereon, located at Barangay Bayanbayanan, Quezon City consisting of Thirty Square Meters and Eighty Seven Square Decimeters (30.87), more or less, covered by Transfer Certificate of Title No. 80485 of the Registry of Deeds of Quezon City; that you executed a Deed of Absolute Sale over the abovementioned property together with the building improvements thereon in favor of Rogaciano B. Aguirre for the sum of One Million Pesos (P1,000,000.00); that you are going to use the proceeds of the sale to purchase a new principal residence within one (1) year or within the period allowed by law; and that you want to avail of the tax exemption provided for in 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 their 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 her 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)(2) of the Tax Code of 1997. From the foregoing, it is clear that you will use the proceeds of the sale or disposition of your properties to purchase a new principal residence within one (1) year or within the period allowed by law. Accordingly, since you have complied with all the conditions set forth under Section 24(D)(2) of the Tax Code of 1997, the proceeds from sale of your properties is exempt from the 6% capital gains tax. The concerned Register of Deeds is, however, requested to annotate at the back of the subject certificate of title that the subject exemption shall be rendered null and void and that the entire proceeds of the said sale 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 24(D)(2) of the Tax Code of 1997. (BIR Ruling No. 097-98 dated June 24, 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, then this ruling shall be considered null and void. EHaCID Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS II Deputy Commissioner (Legal and Enforcement Group)