BIR Ruling [DA-321-00]

August 22, 2000 BIR RULING [DA-321-00] 24 (D) (2); DA-169-2000; DA-321-2000 Mrs . Liliy Lee Lim Alexandra Condominium, Bldg. I Unit D1124, Pasig City M a d a m : This refers to your undated letter requesting for exemption from the payment of capital gains tax on the sale of your principal residence in favor of Michael Harris Lim and Lloyd Eric Lim pursuant to Section 24(D)(2) of the Tax Code of 1997. It is represented that you are the absolute and registered owner of a condominium unit situated at Unit D1124, Alexandra Condominium Bldg. I, Pasig City covered by Condominium Certificate of Title No. PT-12486 issued by the Registry of Deeds for Pasig City with an area of 216.00 square meters; that the property is being utilized as the family's principal residence; that on May 12, 2000, A Deed of Absolute Sale was executed whereby said property was sold in favor of Michael Harris Lim and Lloyd Eric Lim for and in consideration of Four Million Pesos (P4,000,000.00); that the said Deed of Absolute Sale was notarized on July 13, 2000; that the proceeds of the sale will be for the sole purpose of acquiring/constructing a new principal residence within eighteen calendar months from the date of sale; and that in support of your request, you submitted to this Office copies of the following documents: 1. Deed of Absolute Sale; 2. Condominium Certificate of Title No. PT-12486; 3. Sworn Declaration of Intent as to the utilization of the proceeds of said sale; 4. Certification of the Barangay Captain where the property sold is located, to the fact that Ms. Lily Lee Lim is a resident of Unit D1124, Alexandra Condominium, #29 Meralco Avenue, Barangay San Antonio, Pasig City; and 5. Other pertinent documents. HTaIAC 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 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 his intention to avail of the tax exemption thus mentioned, and 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 fully utilize the proceeds of the sale or disposition of the subject property to acquire/construct a 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 proceeds from the sale of your property in favor of Michael Harris Lim and Lloyd Eric Lim, is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. However, the said sale shall be subject to the documentary stamp tax imposed under Section 196 of the same Code based on the consideration or current fair market value as determined in accordance with Section 6(E) of the said Code. (BIR Ruling DA-169-2000 dated March 21, 2000) The entire proceeds of the said sale, however, 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 3 of Revenue Regulations No. 13-99 dated July 26, 1999, implementing Section 24 (D)(2) of the Tax Code of 1997. IDCHTE 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group