BIR Ruling [DA-328-97]

October 1, 1997 BIR RULING [DA-328-97] SyCip Gorres Velayo & Co. Malayan House Km 7 J. P. Laurel Avenue Lanang, Davao City Attention: E.C. Alcantara and H.T. Cabreros Tax Division Gentlemen : This refers to your letter dated June 3, 1997, indorsed to us on July 28, 1997 by the Regional Director of Revenue Region No. 19, Davao City, requesting confirmation of your opinion that the sale of the land owned by your client, Mr. Cresenciano De Leon, is a capital asset subject to the 5% Capital Gains Tax pursuant to Section 33 (a) (1) of the Tax Code. Records of this case disclosed that on April 24, 1997, a Deed of Absolute Sale over a parcel of land with an area of 1,000 square meters, more or less situated at Claro M. Recto Street, Davao City, and covered by Transfer Certificate of Title No. T-81778 of the Registry of Deeds of Davao City, was executed by and between Mr. Cresenciano De Leon and the Bank of Southeast Asia, whereupon the corresponding capital gains tax and documentary stamp tax were paid; that the assigned Examiner ascertained the property subject of sale as a commercial lot on which a two-storey commercial building was once existing and was demolished prior to the execution of the aforementioned Deed of Sale; and that at the time of such sale, subject property had no buildings or improvements thereon. In reply, please be informed that Section 21 (e) of the Tax Code, as amended, subjects to a 5% capital gains tax the sale of real property located in the Philippines which is classified as a capital asset. TCcDaE Section 33 of the Tax Code, as amended, defines the term ''capital asset'' as property held by the taxpayer (whether or not connected with his trade or business), but does not include (a) stock in trade property includible in his inventory if on hand at the close of the taxable year, (b) property held primarily for sale to customer in the ordinary course of his trade or business of a character which is subject to the allowance for depreciation provided in subsection (f) of Section 29, or (e) real property used in the trade or business of the taxpayer. Considering the foregoing circumstances, it is the opinion of this Office as it hereby holds that the property of Mr. Cresenciano De Leon is deemed a capital asset because the property does not fall under any of the exceptions stated in Section 33 abovecited. Such being the case, the said property shall be subject only to a 5% capital gains tax under Section 21 (e) of the Tax Code, as amended. (BIR Ruling No. 107-91 dated June 17, 1991) This serves as an authority for the Revenue District Officer to issue the Certificate Authorizing Registration (CAR) on the sale of the subject realty after payment of the corresponding capital gains tax and documentary stamp tax. 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, (SGD.) SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner (Legal Service)